Demonetized Indian banknotes in Nepal

RBI team arriving today to discuss exchange facility

Published On: February 28, 2017 12:40 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Feb 28: A team of Reserve Bank of India (RBI) -- the central monetary authority of India -- is arriving Nepal on Tuesday to hold discussion on management of demonetized Indian banknotes that Nepali bank and financial institutions (BFIs) and general public possess.

According to a senior official of Nepal Rastra Bank (NRB), the team is scheduled to arrive in Kathmandu on Tuesday to hold talks with the stakeholders concerned on the modality of exchanging demonetized Indian banknotes of 1,000 and 500 denominations. “

"We have got information that the Indian team will arrive Kathmandu tomorrow to hold talks on providing exchange facility for demonetized Indian banknotes that bank and financial institutions (BFIs) as well as public hold. However, I do not have any further information to share with you right n”w," Narayan Prasad Paudel, the central bank spokesperson, told Republica.

Earlier in the second week of January, a team led by NRB Deputy Governor Chintamani Shiwakoti had visited India as part of the efforts to return scrapped banknotes. The team had proposed a modality for providing exchange facility for those who hold such currency in Nepal. 

Concerned about the possibility of 'black money' or counterfeit banknotes getting exchange facility in Nepal, the RBI officials had reportedly told the Nepali team that they might come to Nepal to assess the problem, hold discussions with stakeholders and observe the banking system.

Though Prime Minister Pushpa Kamal Dahal had made a request to his Indian counterpart Narendra Modi immediately after India demonetized 1,000 and 500 banknotes, the southern neighbor has not yet said officially whether it would accept such banknotes that Nepali are allowed to carry legally. 

There were reports of illegal exchange of Indian currency at half the value of the scrapped banknotes as uncertainty over the fate of such banknotes has not ended yet. While the Indian government had also formed a committee to look into the issue of demonetized Indian banknotes that Nepal and Bhutan hold, it has yet to make its report public.

According to the NRB, nearly 33.6 million Indian rupees in 1,000 and 500 banknotes are currently in the Nepali banking channel.  However, it is not known how much Indian 1,000 and 500 rupee notes are in the hands of Nepali traders, families of migrant workers and general public. 

Federation of Nepalese Chambers of Commerce and Industries (FNCCI) President Pashupati Murarka told Republica that Nepali traders and general public hold such banknotes worth around Rs 10 billion.

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