Bank of Uganda Caps Cash Withdrawals in Push for Digital Payments

The Bank of Uganda (BoU) is set to significantly alter Uganda's financial landscape by introducing new caps on over-the-counter cash withdrawals, effective January 1, 2027. This strategic move aims to accelerate the adoption of digital financial services, enhance transaction transparency, and reduce the nation's reliance on cash.

Under the new regulations, individual account holders will be restricted to withdrawing a maximum of Shs50 million per day and Shs500 million per week. Corporate entities and businesses will face daily limits of Shs250 million and weekly limits of Shs2.5 billion. These restrictions will apply across all accounts held with financial institutions supervised by the central bank. Importantly, transactions conducted through electronic payment channels like Real Time Gross Settlement (RTGS) and Electronic Funds Transfers (EFTs) will remain unaffected, as the BoU continues to promote these as safer and more efficient alternatives.

The central bank stated that the decision was influenced by evolving consumer behavior and the rapid expansion of electronic transactions nationwide. "Digital payments continue to grow in volume and value, indicating that consumers trust and prefer their efficiency," the BoU noted in a statement. Electronic credit transfers have emerged as the most prevalent payment method in Uganda, reflecting growing confidence in digital financial services among individuals, businesses, and government institutions.

Recognizing that certain economic sectors still heavily depend on cash, the BoU has outlined measures to prevent disruption to legitimate business operations. Supervised financial institutions will be required to develop risk-based customer profiles, potentially allowing for adjusted withdrawal limits based on a customer's transaction history and activities. Furthermore, commercial banks and other regulated entities can seek exceptional approvals from the central bank for customers or transactions requiring cash withdrawals exceeding the prescribed limits.

Financial institutions are also directed to actively encourage customers to embrace alternative payment channels, including RTGS, EFT, and mobile money bank-to-wallet transfers. Analysts anticipate that these new limits will have a substantial impact on businesses and individuals accustomed to large cash transactions, particularly in cash-dominant sectors. Concurrently, the policy is expected to expedite the transition towards electronic payments across Uganda.

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Digital payments continue to grow in volume and value, indicating that consumers trust and prefer their efficiency.