IC demonetization effects

NRB may seek proof of earning for exchange

Published On: November 12, 2016 12:00 AM NPT By: Sagar Ghimire  | @sagarghi

KATHMANDU, Nov 12: Nepal Rastra Bank (NRB) officials have said that they may ask people having 1,000 and 500 Indian rupee bills to furnish proof of the exchange that they had if it decides to provide exchange facility for people holding Indian currency legally. 

“It is not sure whether the Indian government would swap Indian currency that we have in Nepal. Even if it agrees, we may have to ask people to furnish proof of the earning in Indian currency or proof of the exchange,” Bhisma Raj Dhungana, executive director of the NRB, told Republica. 

"As it is a fight against black money, we cannot provide exchange service to anybody with whatever amount s/he has without any source,” he added.

Dhungana told Republica that the central bank expects to get response to its letter sent to RBI next week. "Based on the response, we will let public know what can be done with those banknotes that people have," he added. 

Earlier on Friday, Nepal Rastra Bank (NRB) had dispatched a letter to the Indian central bank, Reserve Bank of India, seeking its help in swapping the demonetized Indian currency of 1,000 and 500 denominations in Nepal. Following the sudden decision of the Indian government to withdraw the banknotes from circulation for curbing black money, the NRB had issued a directive to money changers, and bank and financial institutions (BFIs), barring them from doing exchange transactions of those banknotes. While the NRB has taken initiative to return demonetized Indian currency, the fate of Indian banknotes in possession of general public is still uncertain.

The central bank officials have told Republica that there are chances that they might provide exchange facility for small amount only if the Indian government responded positively to their letter. 

The NRB has asked the bank and financial institutions to furnish details of Indian currency in their possession. 

Conservative estimates show that nearly Rs 300 million worth of 1,000 and 500 Indian rupee bills are in the Nepali banking system. The central bank is clueless about the data of such banknotes outside the banking channel.

Former FinMins for intensifying diplomatic efforts for exchange
Former finance ministers have urged the government to intensify diplomatic efforts with India to provide exchange service for Nepalis possessing Indian currency of 1,000 and 500 denominations.

Speaking at the parliament on Friday, they said that the government cannot remain indifferent to people's problems.

"The decision of the Indian government to ban Indian currency of 1,000 and 500 denominations has also affected many Nepalis who possess those banknotes. Those living in border areas as well as workers returning from India and their families are affected by this decision," said former Finance Minister Ram Sharan Mahat. "It seems that the Nepal Rastra Bank is focusing on return of only the demonetized notes that are in the banking system. The government should take diplomatic initiative to provide exchange facility to people who have such banknotes," the Nepali Congress leader said.

Similarly, another former Finance Minister Surendra Pandey also requested the government to address the problem. “The government itself has given permission to hold up to IRs 25,000. While the amount higher than that is itself illegal, people possessing such banknotes up to the legal extent should get exchange facility," Pandey, who is a CPN-UML leader, said. 

Pandey also lauded the Indian government decision. "This has sent a message that people should use banking channel rather than cash,” he said, adding: “Public should not hold foreign currency.”

He, however, added that the government should provide exchange opportunity for Nepalis who possess demonetized Indian banknotes earned through legal means. 

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