RBI team's report to decide fate of scrapped Indian banknotes

Published On: March 2, 2017 12:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, March 2: A two-member team of Reserve Bank of India (RBI) has held discussions with the officials of Nepal Rastra Bank (NRB) and representatives of commercial banks on a range of technical issues on providing exchange facility for demonetized Indian banknotes of 1,000 and 500 denominations in Nepal.

The team had arrived Kathmandu on Tuesday to hold discussions on management of demonetized Indian banknotes that Nepali bank and financial institutions (BFIs) and general public possess.

The team, which included members from the currency management department and supervision department of the RBI, held discussion on issues like know-your-customer, bank account opening process, anti-money laundering safety provision, banking regulation and laws, among other issues, according to officials of the NRB. 

“The team held discussions with the officials of NRB as well as bankers. They are going to prepare a technical report based on their observations and discussions with us and submit it to the RBI,” said Bhisma Raj Dhungana, an executive director at the NRB. “They told us that they would submit their report and the Indian government will take a decision on providing exchange facility for Nepal after studying the report,” Dhungana, who also heads the Foreign Exchange Department of the NRB, told Republica. 

Dhungana, however, said he cannot say how long the committee would take to prepare its report and the Indian government to make a final call on whether to provide exchange facility to Nepal. 

Another RBI team is said to be heading to Bhutan for similar technical assessment before submitting the reports of two countries together, according to Dhungana. 

The RBI team, which will return home on Thursday, also held consultations with representatives of Standard Chartered Bank Nepal Ltd, Rastriya Banijya Bank Ltd, Nepal SBI Bank Ltd, Everest Bank Ltd and NIC Asia Bank Ltd to understand how the exchange facility would work at the operational level. 

While the team seemed to be positive toward providing exchange facility, they were also concerned over the possibility of Indian nationals, who hold black money, misusing the facility provided to Nepal, Dhungana said. “We have tried to assure them that the central bank will have strong vetting process for those coming to exchange such banknotes so that nobody could misuse the facility,” he added.  

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.

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 such banknotes 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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