With the deadline set by the Indian government to exchange old notes in the denominations of 500 and 1,000 expiring on Friday, India is preparing to make a “special arrangement” for Nepal to replace the demonetised bills, Indian officials have said.

New Delhi is learnt to be preparing to dispatch a team to Kathmandu to hold consultation with Nepal Rastra Bank officials to finalise the modality of exchanging the notes. Earlier, a team led by the NRB deputy governor with representatives from the Ministry of Finance was scheduled to visit India. Indian authorities, however, had said there was no need for Nepali officials to visit India as they were busy managing the situation arising from the decision to pull the notes back from circulation.

India had formed an inter-ministerial committee earlier to suggest ways for resolving the problems faced by the diplomatic community and holders of the currency in Nepal and Bhutan. Replacement of the old notes is likely in the first week of January.

“There will be some provisions for exchanging the old notes in Nepal for a limited period,” an Indian official said requesting anonymity. The Indian Embassy in Kathmandu is in regular contact with Finance Ministry officials for addressing the problem.

In a meeting with Nepali Ambassador to India Deep Kumar Upadhyaya, Indian State Minister for External Affairs VK Singh had pledged measures to replace the notes. “We have received assurances that there will be some provisions and we are awaiting a decision,” Upadhyaya said.

The Indian side has expressed fears that there is a high chance of old IC notes entering Nepal from India due to the open border, stressing the need for a strict exchange mechanism. Upadhyaya said Nepali citizens were exchanging the old notes in their possession at lower rates feeling uncertain about getting the legal tender for their old cash.

Officials say there will be a short window for exchanging the notes. There could be difficulties for people residing in rural areas to get the new notes. Nepal has requested India to allow a Nepali to exchange the notes worth up to Rs25,000.

Meanwhile, Nepali workers in Delhi are also facing a lot of problems in exchanging the old notes. Workers who do not have Indian identity cards or a bank account here are facing troubles in replacing the banned bills.

As per the Indian government’s decision, Indian banks will not accept the old notes after December 30. 

The remaining notes could be deposited to designated branches of the Reserve Bank of India until March 31 with sufficient explanation for the delay.