Nepal Rastra Bank on Sunday issued a circular prohibiting Nepali travellers, banks and financial institutions from holding or carrying and trading Indian bank notes higher than Rs100.
The central bank said in its circular letter that Indian denominations of 200, 500 and 2,000 cannot be carried and used for trading.
Under the new regulation, Nepali citizens cannot carry these denominations to countries other than India. Similarly, Nepalis are also not allowed to bring such notes from other countries. Indian notes of 100 or below, however, are allowed for trading and conversion, the bank’s circular reads.
On December 13, the Cabinet had decided to publish the notification in the Nepal Gazette not to allow people to carry Indian currency notes above 100 denominations in Nepal.
The ban has been criticised by travel traders and other business entrepreneurs saying that it would hurt the country’s burgeoning tourism at a time when the government has announced Visit Nepal campaign with an objective to draw at least 2 million tourists in 2020.
Since a majority of Indians come to Nepal over land from bordering towns, it’s difficult for them to convert their currency to dollar or Euro, they said.
The overland Indian visitors’ survey showed that 1.2 million Indians came to Nepal through the surface route while 160,132 travelled via air. The average length of stay of Indian tourists coming overland was 5.8 days. Average expenditure per visitor was as much as Rs11,310.
According to Indian media reports, the advantage of travelling to Nepal was that one did not need to change the currency.
Nepal Rastra Bank had also written to the Reserve Bank of India requesting to allow using the high denomination Indian notes in Nepal.
The Indian government, in a surprise move on November 8, 2016, pulled INR500 and INR1,000 out of circulation “to unearth unaccounted wealth and fight corruption”. Since then, the Nepal Rastra Bank have also banned those notes in Nepal.
Before that, the Nepali central bank had allowed Nepalis to carry Indian banknotes of 500 and 1,000 denominations based on the Indian government’s decision.
The Reserve Bank of India, in February 2015, introduced the Foreign Exchange Management (export and import of currency) Regulations, allowing Nepali and Bhutanese citizens to “carry Reserve Bank of India currency notes of denomination INR500 and/or INR1,000 up to a limit of INR25,000”.
Following the Indian government’s move of 2016, billions of Indian currency notes of 500 and 1000 are still stuck in Nepal.