India positive about replacing banned notes with legal bills

- BIBEK SUBEDI, Kathmandu

Nov 24, 2016-

The Indian government has responded positively to the proposal made by the Nepal Rastra Bank (NRB) to provide exchange facility to Nepalis holding banned Indian banknotes of 500 and 1,000 here in Nepal. 

During an unofficial meeting with Nepali businesspersons on Wednesday, officials of the Embassy of India in Kathmandu said their government was positive about allowing each Nepali citizen to exchange IRs 500 and IRs 1,000 worth up to IRs 25,000 with legal bills here in the country.

“We have forwarded the modality prepared by the NRB to our central government and have received positive response,” a leading businessperson quoted an embassy official as saying. “We are expecting a decision from our government soon.” 

India is cautious about providing exchange facility to citizens of a foreign country, as it fears it could be used as “a clearing house” to convert counterfeit currency into legal tenders, the businessperson told the Post on condition of anonymity. 

“But we tried to convince Indian officials that there was very little chance of Nepal being used for that purpose because the payment is made in Nepali currency, which is of no use in India,” he said. “Also, the embassy looks convinced with the modality prepared by the central bank.”

The Post could not contact embassy officials to independently the verify statements made by the businessperson.

The NRB, on the other hand, said the Indian embassy has not made any official statement in this regard.

“We did not hold any communication with the embassy today,” said a highly placed source at the NRB. “However, Indian officials told us yesterday that they would immediately forward any decision made by the India’s central government to us.” 

The source was optimistic about hearing something from the Indian embassy by Thursday. 

The central bank in its modality forwarded to the Indian government had said it planned to collect recently banned Indian 500 and 1,000 rupee notes from Nepali citizens and send them to the Reserve Bank of India (RBI) for verification before offering equivalent exchange in Nepali currency.

The NRB has clearly stated that it will not provide over-the-counter exchange facility for Nepalis holding banned Indian currency, saying it lacks expertise and technology to identify counterfeit Indian currency.

As per the NRB’s modality, Nepali citizens have to open bank accounts at banks and financial institutions and deposit the demonetised Indian currency to receive the equivalent exchange directly in their bank accounts. 

The modality was prepared by a technical committee formed under the leadership of its Deputy Governor Chintamani Siwakoti last week as per the request made by the Embassy of India in Kathmandu.

The Indian government has also formed a taskforce under the leadership of the RBI to come up with a modality to address the problems being faced by people of Nepal and Bhutan where the circulation of the banned Indian notes is high.

Earlier, Prime Minister Pushpa Kamal Dahal and Finance Minister Krishna Bahadur Mahara through telephonic conversation had urged their Indian counterparts to arrange exchange facilities in Nepal as Nepalis have a large stock of Indian 500 and 1,000 bank notes.

The NRB has said that Nepal’s financial system holds IRs33.6 million in the denominations of 500 and 1,000. The amount includes cash kept in the vaults of banks, financial institutions and the central bank.

However, the actual amount of these banned Indian bank notes in Nepal is expected to be much higher as Nepalis were previously allowed to carry up to IRs 25,000. 

Published: 24-11-2016 08:11

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