Remittances have become one of the most notable economic lifelines for Nepal. Remittances provide foreign exchange that strengthens the balance of payments, support consumption in households across the country, and help reduce poverty. As recent data from Nepal Rastra Bank (NRB) show, total remittance inflows in fiscal year (FY) 2024/25 reached about Rs 1,723.27 billion (approximately US$ 12.64 billion). Nepal's monthly remittance figures have even crossed enthusiastic milestones, exceeding Rs 200 billion in one month for the first time in history. It reflects the deepening reliance of Nepalese families on these funds. International data confirms that Nepal is one of the most remittance-dependent countries in the world, with remittances representing about 26.6 per cent of Nepal's GDP in 2023. For individual households, remittances are not just a supplementary income, they are often the primary source of financial support. In rural and underdeveloped areas remittances regularly help families cover basic needs such as food, school fees, medical treatment, home repairs, and seasonal expenses. Many studies indicate that remittances are linked with tangible reductions in poverty rates over the years. Remittance income also changes consumption patterns at the local level. When families receive money from abroad, they tend to spend on consumer goods, education, and health services rather than on risky or speculative investments. In many remote areas remittance inflows have often acted as an entry point for households to start interacting with financial systems. Despite these positive impacts, remittances have limitations in driving long-term growth. Foreign remittances include money sent by Nepalese working outside Nepal back to their families or accounts in Nepal. These transfers are typically processed through formal channels like licensed remittance operations, banks, or internal money transfer companies. By contrast, domestic remittances include money transferred within Nepal. These transfers involve payments for services: wages paid to workers in other parts of the country, informal support to relatives, and commercial transactions. Before recent regulatory changes, domestic remittance channels helped bridge formal banking limitations by offering cheaper and more accessible ways to transfer money. In recent years, regulatory concerns about anti-money laundering (AML) compliance and informal money transfers known locally as Hundi prompted Nepal Rastra Bank to tighten oversight of domestic remittance services. Beginning around 2022, the central bank started restricting how domestic remittance services could operate. The NRB reduced the allowable transfer limit within Nepal from Rs 100,000 to Rs 25,000 per person, per transaction, per day. Subsequently, in early 2023, Nepal Rastra Bank issued an Integrated Directive of Payment Systems 2079, which removed specific provisions for domestic remittance services. As a result, many licensed remittance operators and small financial service providers were forced to stop domestic transfer services. Before the closures, domestic remittance services allowed families to send and receive money locally in ways that were quick, relatively low-cost, and easy to use, even for people with limited formal education. Domestic remittance channels also supported financial inclusion by connecting rural and remote populations to more formal financial systems, and often acted as entry points for these communities to begin using additional financial products. Furthermore, local remittance services created employment opportunities. In towns and secondary cities where banks were scarce, these agents provided financial services. In addition to employment creation, domestic remittance providers helped diversify payment options in Nepal's financial market. The regulatory shuttering of domestic remittance services has led to multiple adverse effects. First, many rural households lost access to affordable and convenient ways to receive money within Nepal. Second, the closure has hurt small-scale remittance service providers and entrepreneurs. Many local agents who depended on domestic remittance commissions found their revenue streams disappearing almost overnight. In towns and villages across Nepal, agents who once handled 80-90 transactions per day now report handling as few as 10-15 transactions. Third, the closure has triggered financial exclusion for people without sufficient access to digital payment tools or bank accounts. Fourth, reducing formal domestic remittance channels may inadvertently encourage informal alternatives such as Hundi, the very activity regulators intended to discourage. Finally, the closure of domestic remittance services has also impacted the distribution of foreign remittance payments at the local level. Rather than shutting down domestic remittance services entirely, the central bank should consider constructive reforms. Introducing tiered licensing frameworks that allow smaller service providers to operate under proportional compliance requirements can promote competition and expand access in underserved regions. Investing in digital infrastructure and financial literacy programmes will help make digital payments genuinely accessible to rural populations. Similarly, risk-based supervision rather than blanket bans should allow authorities to monitor and control genuinely suspicious transactions while enabling everyday domestic remittance flows to continue. Finally, strengthening public-private collaboration between Nepal Rastra Bank, banks, and private fintech innovators can lead to pilot projects of secure, scalable domestic transfer systems that are cost-effective and user-friendly. Poudel is with Tribhuvan University, Kirtipur