Nepalis waiting endlessly to exchange Indian notes

June 21, 2017

The Kathmandu Post, 21 June 2017

It has been more than seven months since the Indian government pulled 500- and 1,000-rupee banknotes out of circulation, but it has not provided exchange facilities to Nepali citizens holding the demonetized bills.

The Finance Ministry wrote to the Indian government more than three weeks ago requesting it to make arrangements to exchange them for legal tender currency, but it has got no response.

The Finance Ministry wrote to the Indian government following the request of Nepal Rastra Bank (NRB) to take up the matter at the top level.

“We wrote to the Indian government through our Foreign Ministry requesting them to provide exchange facility soon,” said Anand Raj Dhakal, joint secretary of the Finance Ministry. “But they haven’t responded, and we are clueless about India’s position on the issue. I think the matter should be raised at the highest level.”

The Indian Embassy spokesperson did not comment on the issue.

Previously, NRB had requested the Reserve Bank of India (RBI) to provide exchange facilities to Nepalis possessing the banned banknotes. Last April, it asked the RBI for permission to start exchanging demonetised banknotes worth up to IRs 4,500 per person as proposed by the Indian central bank.

During a meeting held in Nepal in March, RBI officials had proposed to allow Nepalis to exchange demonetised Indian banknotes worth up to IRs 4,500 per individual. At that time, NRB officials had declined the offer and demanded that the ceiling be raised to IRs 25,000 per person.

As both sides stuck to their stances, the meeting ended inconclusively. Later, NRB wrote to the Ministry of Finance for its advice. The Finance Ministry told NRB to provide exchange facility for up to IRs4,500 per individual as proposed by India, but continue pushing Indian authorities to raise the ceiling. NRB subsequently wrote to the RBI as per the Finance Ministry’s instruction.

The Nepali central bank had allowed Nepalis to carry Indian banknotes of 500- and 1,000-rupee denominations based on the Indian government’s decision. The RBI launched the Foreign Exchange Management (Export and Import of Currency) Regulations in 2015 allowing Nepali and Bhutanese citizens to ‘carry Reserve Bank of India currency notes of denomination IRs500 and/or IRs1,000 up to a limit of IRs25,000’.

NRB has said that IRs78.5 million in denominations of 500 and 1,000 exists within the financial system in Nepal. The figure includes cash deposited in banks, financial institutions and NRB.

Previously, NRB had estimated the amount to be around IRs33.6 million. But the actual stock of banned Indian banknotes is expected to be much higher because Nepalis were previously allowed to carry Indian 500 and 1,000 rupee notes worth up to IRs 25,000.

Also, those residing in areas bordering India usually stash Indian notes of larger denominations as they frequently travel to Indian markets to buy goods.