What is Remittance (Videshi Mudra)?

A remittance is money that a person working or living abroad sends back to family or others in their home country. In Nepal the inward flow of these earnings — often called videshi mudra ("foreign currency") in everyday speech and विप्रेषण (vipreshan) or simply "remittance" in official Nepali — is the single largest source of foreign exchange and one of the most important pillars of the national economy. The money is earned overseas by Nepali migrant workers, mostly in the Gulf states and Malaysia, and converted into Nepali rupees when it reaches the recipient.

Remittances matter so much because of their sheer scale relative to the size of the economy. Nepal Rastra Bank (NRB), the central bank, reported remittance inflows of about Rs 1,723 billion (roughly USD 12.6 billion) in fiscal year 2024/25, up about 19% from the previous year. That is equal to roughly a quarter to a little over a quarter of Nepal's gross domestic product — a ratio among the highest of any country in the world. By comparison, remittances dwarf both foreign direct investment and official development aid (foreign grants and loans) combined.

Because the inflow is so large, remittances drive Nepal's external balance. They are the main reason the country can pay for its large import bill and maintain healthy foreign-exchange reserves. By 2025 those reserves had climbed to record levels — enough to cover well over a year of imports — largely on the strength of remittance earnings. At the household level the same money funds daily consumption, school fees, medical bills, house construction and loan repayment for millions of families.

A typical case: a worker from Dhading takes a two-year contract as a security guard in Qatar. Each month he keeps part of his wage for food and lodging and sends the rest home. To do so he hands cash (or transfers from his Qatari bank) to a licensed remittance operator. Within hours, his family in Nepal collects the equivalent in Nepali rupees from a remittance agent, bank branch or, increasingly, directly into a bank account or mobile wallet. The exchange happens at the prevailing rate — for instance, with the rupee around Rs 140 per US dollar in late 2025, USD 500 sent home becomes roughly Rs 70,000.

Households use this income in fairly predictable ways. Survey and central-bank data show that the large majority of remittance money goes to everyday consumption — food, clothing, rent and utilities — followed by loan repayment (many migrants borrow heavily to pay recruitment costs before they leave), education for children, and health care. Smaller shares go to land and house purchase, savings and, less often, productive investment in a business or farm. This consumption-heavy pattern is why economists describe remittances as a powerful poverty-reduction tool but a weaker engine of long-term productive growth.

At the macro level the flow is highly seasonal and visible in NRB's monthly statistics, and inflows have continued to climb in FY 2025/26. Spikes typically appear before major festivals such as Dashain and Tihar, when migrants send extra money home for celebrations, while broader growth tracks the steady rise in worker departures over recent years.

Sending money home is not new to Nepal — historically, men from the hills served as soldiers (the Gurkhas in the British and Indian armies) and as labourers in India, sending wages back to their villages across the open border. Modern large-scale labour migration to the Gulf and Southeast Asia, however, took off mainly from the 1990s, after the 1990 democratic change opened the country and demand for workers in Qatar, Saudi Arabia, the UAE, Kuwait and Malaysia grew rapidly. Recorded remittances rose from a small fraction of GDP around 2000 to more than 20% by the late 2010s, transforming the balance of payments.

The legal framework rests on two pillars. Outbound labour migration is governed by the Foreign Employment Act, 2007 (and its rules), administered by the Department of Foreign Employment, which licenses recruitment agencies, sets worker protections and lists approved destination countries. The money side is regulated by Nepal Rastra Bank under the Foreign Exchange (Regulation) Act and NRB's remittance bylaws, which license money-transfer companies, require that foreign currency be brought through the formal banking system, and task the central bank with promoting formal-channel transfers and keeping remittance statistics.

NRB licenses numerous remittance companies (among the largest and best known is IME) and authorises banks to handle inward transfers; global operators such as Western Union and MoneyGram work through these licensed partners. The state actively encourages formal channels — through remittance-linked savings products, foreign-currency accounts for migrants, and at times bonus incentives — both to capture foreign exchange and to fight illegal transfer. Informal hundi (also called hawala) — an off-the-books network that moves value without physically moving currency across borders — remains a persistent leakage and is illegal under the Foreign Exchange Act and the Asset (Money) Laundering Prevention Act, 2008.

The benefits of remittances for Nepal are well documented. The inflow is widely credited with helping cut poverty sharply over the past two decades, smoothing household income, financing education and health, and providing a financial cushion that kept the economy stable even during shocks such as the 2015 earthquake and the COVID-19 pandemic. For the country as a whole, remittances underwrite the foreign-exchange reserves that pay for imports of fuel, food and goods.

The dependence also creates vulnerabilities. Because the bulk of the money funds consumption rather than productive investment, remittances do relatively little to build factories, jobs or exports at home, and they can encourage import-heavy spending. Heavy out-migration removes working-age adults from farms and towns, and some studies link it to lower agricultural output and labour shortages in rural Nepal. The flow is also exposed to events far outside Nepal's control — oil-price swings in the Gulf, policy or visa changes in destination countries, and regional conflict in West Asia can all disrupt earnings quickly.

Policymakers and development agencies (including the World Bank, IFAD and the IOM) therefore frame the central challenge as harnessing remittances for long-term growth: lowering the cost of sending money, channelling more of it through formal and banked routes, protecting migrant workers from exploitative recruitment debt, and creating domestic investment options so that families save and invest part of the inflow rather than only consuming it.

Remittance is often confused with foreign aid or foreign direct investment (FDI). All three bring foreign currency into Nepal, but they are distinct: remittances are private earnings sent by individuals; FDI is investment by foreign companies; and foreign aid is grants or concessional loans from other governments and multilateral institutions. In Nepal's case remittances are far larger than FDI and aid combined.

The everyday Nepali phrase videshi mudra literally means "foreign currency" and is used loosely to refer to remittance earnings, but technically videshi mudra is any foreign exchange (including from tourism and exports), while remittance specifically means the worker-sent portion. Closely linked terms include foreign employment (वैदेशिक रोजगार, the labour migration that generates the money), forex / foreign-exchange reserves (the national stockpile the inflow feeds), and the balance of payments (the national accounting in which remittances appear as a current-transfer credit).

Finally, it is important to distinguish formal remittance from hundi. Both move money home, but formal remittance goes through NRB-licensed companies and banks, is recorded in national statistics, and is legal; hundi is an unregistered, illegal parallel system. Choosing formal channels protects the sender and receiver legally, ensures the money is traceable, and adds to the country's official foreign-exchange reserves.