The Indian Embassy in Kathmandu has asked Nepal Rastra Bank (NRB) to prepare a modality for exchanging recently banned Rs500 and Rs1,000 Indian banknotes held by Nepali citizens, the central bank said.

“We held a meeting with Indian Embassy officials in Kathmandu on Thursday. They were positive about providing a solution, and they have asked us to prepare exchange procedures,” said Bhisma Raj Dhungana, chief of the Foreign Exchange Department of NRB.

“However, their major concern is that if such a facility is given to Nepali citizens, Indians holding illegal money might take advantage of it.” They have asked us to prepare a modality to prevent Nepal from being used as clearing house for illegal money from India, he added.

Pursuant to the embassy’s request, NRB has formed a technical committee under the leadership of NRB Deputy Governor Chintamani Siwakoti. The panel includes representatives from the Finance Ministry, NRB’s Foreign Exchange Department, Nepal Bankers’ Association and Development Bankers’ Association.

The committee will draw up a modality to submit to the embassy which will be forwarded to the Indian central government. “We are hopeful that a solution will be found soon,” said Dhungana.  

On Tuesday, the Indian government also formed a taskforce under the leadership of the Reserve Bank of India (RBI), the Indian central bank, to come up with a modality to address the problems being faced by people in Nepal and Bhutan where the circulation of the banned Indian notes is high.

The formation of the taskforce, according to NRB, signals that a solution to remove the hardships faced by Nepalis who possess the banned notes is imminent.

Earlier on Monday, Prime Minister Pushpa Kamal Dahal had urged his Indian counterpart to arrange exchange facilities in Nepal as Nepalis have a large stock of Indian notes of Rs500 and Rs1,000 denominations.

Finance Minister Krishna Bahadur Mahara had also made a similar request to his Indian counterpart Arun Jaitly.

NRB has said that Nepal’s financial system holds IRs33.6 million in denominations of Rs500 and Rs1,000. The total includes cash kept in the vaults of banks, financial institutions and the central bank.

However, the actual amount of these banned Indian banknotes in Nepal is expected to be much higher as Nepalis were previously allowed to carry cash worth up to IRs25,000.

Also, hundreds of thousands of Nepalis who work as daily-wage labourers in India, patients seeking medical treatment and border residents who customarily buy daily essentials across the border are said to be holding large amounts of the scrapped Indian banknotes.

The Indian government has said that people who have accounts with Indian banks need not worry as they will provide them currency exchange facilities. But many Nepalis who possess the banned paper money do not have accounts with Indian banks. The Indian government has set a deadline of December 30 to deposit the scrapped notes at banks.

House panel asks for exchange facilities

KATHMANDU: The parliamentary Finance Committee has directed the government to arrange exchange facilities for Nepalis holding demonetized Indian Rs500 and Rs1,000 bills. A House committee meeting held on Thursday directed the Finance Ministry and Nepal Rastra Bank (NRB) to use diplomatic channels to provide exchange facilities. Speaking at the meeting, lawmakers stressed the need to resolve the issues particularly faced by people living in border areas. NRB Governor Chiranjivi Nepal said that they were holding talks with the Reserve Bank of India to simplify exch- ange procedures and that som- ething would be done soon. (PR)