NRB urges India to facilitate exchange of banned Indian bills

- BIBEK SUBEDI, Kathmandu

Nov 10, 2016-

The Nepal Rastra Bank (NRB) on Wednesday urged the Indian government to make some arrangements so that Nepalis can exchange 500 and 1,000 Indian banknotes with valid bills here in the country.

The request comes a day after the Indian government prohibited use of Indian currency of 500 and 1,000 denominations.

Indian Prime Minister Narendra Modi on Tuesday announced that 500 and 1,000 rupee notes would be withdrawn from circulation effective Tuesday midnight “to crack down on rampant corruption and counterfeit currency”. 

Following the Indian government’s surprise decision, the NRB also banned the use of those bank notes in Nepal effective from Wednesday.

Issuing a circular, the central bank directed its branches, banks and financial institutions (BFIs) and money changers not to use or exchange Indian currency of those denominations.

“We have asked Indian government officials to provide a certain time limit so that Nepalis holding these abolished bills can exchange them with legal bills here in the country,” a senior NRB official told the Post. 

A decision to make the request was taken during a meeting held between officials from the NRB and the Embassy of India in Kathmandu on Wednesday. 

“The Indian officials were positive about the matter and have promised to convey the message to their central government,” the NRB official said.

The request was also formally made to the Indian government in a letter written by the NRB to the Reserve Bank of India (RBI) on Wednesday.

Ruby Jaspreet Sharma, Spokesperson for the Embassy of India in Kathmandu, however, could not say whether the Indian government would provide exchange facility for Nepalis possessing the banned Indian bank notes here in Nepal as requested by Nepali officials.

“Nepali citizens, like the Indian citizens, can also deposit the currency of 500 and 1000 denominations at Indian banks if they have bank accounts there,” said Sharma. “For, those who don’t have bank accounts in India, the NRB will come up with some solutions after holding discussions with the RBI.”

Although many Nepalis hold Indian rupees, it is difficult to ascertain the amount of the bank notes that have been pulled from circulation has been stashed here.

“We are unaware of the stock held by Nepali citizens,” NRB Spokesperson Narayan Prasad Poudel told the Post. 

He, however, said around IRs 20 million in denominations of 500 and 1,000 is within the formal financial system. “But we are yet to get information from three state-controlled banks,” he added.

Prior to the ban, Nepali citizens were allowed to carry Indian bank notes of 500 and 1,000 denominations up to IRs25,000. So, chances of Nepalis in large numbers possessing bank notes of those denominations are quite high. Also, those residing in areas bordering India usually stash Indian notes of greater denominations for the purpose of purchasing goods from across the border and other reasons.

It is essential to exchange these bills at the earliest as the Indian government has given a deadline of 50 days to deposit the abolished banknotes at banks and postal offices.

The central bank, in its circular, however, has not said what Nepalis possessing these abolished banknotes should do. 

NRB officials said they will be able to make a statement on the matter only after hearing from the RBI. 

Published: 10-11-2016 07:46

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