The Central Bank said the directive is to help combat tax evasion and encourage more efficient use of money.
According to the directive, an individual can withdraw up to 200,000 birrs ($ 5,800) per day.
A person can only withdraw 1 million birr ($ 29,000) in one month.
However, companies can withdraw higher amounts. The Ethiopian central bank said companies could withdraw about $ 8,000 a day and close to $ 74,000 a month.
The central bank governor, Yinager Dessie, said that this directive will help manage the liquidity of financial institutions. He added that they would sanction banks and credit companies that do not comply with the directive.
Ethiopia's economy is described as a money economy. Experts said this new directive could affect small business transactions as they adapt to the new measures.
Other experts raised concerns about the timing of the announcement. They believe that this is useless at a time when the country's economy is facing the economic impacts of the coronavirus pandemic.