Demonetized Indian notes held by Nepalis may turn worthless papers
April 6, 2017 10:53 AM NPT
Deadline to respond to RBI offer expired on March 31
KATHMANDU, April 6: With the deadline of the Indian government to respond to an offer of providing exchange facility of up to Indian rupees (IRs) 4,500 expiring last week without any formal response from the government, the fate of demonetized Indian banknotes held by Nepalis now hangs in balance.
The fate of Indian banknotes of 500 and 1,000 denominations in possession of Nepali nationals is still uncertain even though it has already been five months since the Indian government announced to withdraw legal tender of such banknotes.
On November 8 last year, the Indian government suddenly announced the demonetization of 500 and 1,000 denominated banknotes as part of its efforts to combat corruption.
A team of Reserve Bank of India (RBI) led by one of its executive directors, Dipali Pant Joshi, had come to Nepal on March 26 and held talks with Nepali officials on providing exchange facility for Nepali nationals holding demonetized Indian banknotes up to the limit of IRs 4,500.
“The deadline to respond to their offer expired on March 31. Now, we cannot tell whether such banknotes in the possession of the public will be exchanged,” said Bhisma Raj Dhungana, an executive director of the NRB who was also a member of the Nepali team that held talks with the RBI delegation. “However, India might come up with a separate arrangement if the government again starts diplomatic efforts at the higher level,” he added.
According to NRB officials, who sat in the dialogue with the RBI team, the Indian side had sought ‘yes’ or ‘no’ response from the Nepali side on their offer.
However, the Nepali team led by NRB Deputy Governor Chintamani Siwakoti had turned down the offer and urged the Indian side to provide exchange facility for up to the amount that Nepalis were legally allowed to carry, i.e. IRs 25,000. Stating that they were not allowed to negotiate on the upper limit, the Indian side, however, had asked Nepal to provide its response on their offer by March 31.
However, there has not been any high-level initiative by the government lately to take the matter with the Indian government.
There have already been two visits of the Indian side to hold talks on providing exchange facility to Nepalis holding demonetized Indian banknotes. Similarly, a Nepali team led by Siwakoti had also visited India to discuss the issue.
India fears that Nepal could be used as ‘a clearing house’ to channel illegally amassed demonetized banknotes into its financial system.
However, India’s move has hit Nepalis hard as they have been holding the Indian currency for various purposes.
According to the central bank, Nepal’s financial system holds demonetized Indian banknotes worth IRs 33.6 million. The figure includes only cash parked at banks, financial institutions and the central bank. It is not known how much scrapped Indian notes Nepali traders, families of migrant workers and general public hold.