NRB forms panel to probe banknote shortage

KATHMANDU, March 6: Nepal Rastra Bank (NRB) has constituted a committee to investigate into the unexpected and heavy withdrawals of notes having denominations of Rs 1,000 and 500 from commercial banks--a development that has brought about a shortage of the notes in the market. [break]



A high-ranking government official informed myrepublica.com that the board of directors of the central bank held a meeting on last Monday to form the committee. “The committee, headed by the executive director of the Banks Regulation Department of the central bank, has been asked to submit its report within two weeks,” said the official.



The official said that the meeting also explored the possibilities of increasing the existing order of printing bank notes—which was awarded to an Indonesian company—from 40 million to 80 million pieces, but failed to take a concrete decision on the issue.



Likewise, the central bank is planning to issue directives to financial institutions that will ask them to encourage the use of bank checks for single-transaction payments worth more than Rs 200,000.



As a result of the unusual withdrawals from banks and the delay incurred in replacing old notes by the central bank, the market has been suffering a shortage of notes with Rs 1000 and 500 denominations.



Banking industries sources say that banks have seen unnatural withdrawals in recent weeks, particularly after officials from the government, including the Finance Minister, threatened to take strong action against those who didn’t comply with the recently expired Voluntary Disclosure of Income Scheme (VDIS).



According to a banker, financial institutions have seen withdrawals of deposits amounting to Rs nine billion between mid-January to March 23, a staggering amount that’s almost double the average figure for the given period.



Another reason for the shortage, according to the banker, can be attributed to the central bank’s failing to replace the currency notes that are etched with the image of the former king. A high-ranking government official acknowledged that banks have limited stocks of notes having denominations of Rs 1,000 and Rs 500. “We have a stock worth around Rs 620 million of the notes,” he said, and added that the central bank is getting supplies of fresh notes in four months.

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