One year of demonetization

Nepalis still await exchange facility for scrapped banknotes

Published On: November 10, 2017 05:15 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Nov 10: The government has not made any serious efforts for getting exchange facility for demonetized Indian banknotes held by Nepalis.

Though it has already been a year since India withdrew 1,000 and 500 Indian rupee bills from circulation, Nepali citizens are yet to get exchange facility for the currency in their possession.

In a surprise television announcement on November 8 last year, Indian Prime Minister Narendra Modi had declared that all 1,000 and 500 rupee notes in circulation would cease to be legal tender. The move aimed to flush out 'black money' amassed through tax evasion and eliminate fake currency had also sent ripples across Nepal where citizens are allowed to carry Indian currency up to IRs 25,000.

While the government, and the Nepal Rastra Bank (NRB) in particular, had initially taken initiative to get the exchange facility for the junked banknotes held by Nepali citizens, it has now stopped raising the issue with the Indian side. 

NRB officials say that their efforts alone cannot yield positive results. “We had even sat for negotiations with the Indian officials to fix exchange ceiling for Nepalis,” a high-level official at the NRB told Republica. “However, we are yet to hear the Indian response to our letter to provide exchange facility for up to IRs 4,500 per citizen as proposed by them during the negotiation.”

A team of Reserve Bank of India (RBI) that visited Nepal in the last week of March had proposed to provide exchange facility for up to IRs 4,500 per citizen. Unhappy over the limit proposed by India, the Nepali side initially declined the offer and demanded exchange facility for up to IRs 25,000 that an individual is legally allowed to carry. 

However, the finance ministry later sent a letter to the Indian government, accepting the limit proposed by the Indian side. The Indian government has not responded to the letter yet.

NRB officials also say that the issue should be discussed and dealt with by the government to government level. Though the issue was initially on the agenda of Prime Minister Sher Bahadur Deuba during his state visit to India in August, he did not push the Indian side for providing exchange facility. 

At least three visits from both Nepal and India to each other country, numerous attempts from the central bank, the Ministry of Finance and even a telephone conversation between the prime ministers of the two countries have failed to yield to any result. 

According to the NRB, 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.

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