KATHMANDU, March 28: The market is now witnessing a shortage of 1000 and 500 denominations notes due to unusual withdrawals from banks and a delay in replacing old notes.
Knowledgeable sources informed myrepublica.com that banks have seen unnatural withdrawals after the government, including the Finance Minister, repeatedly threatened to take strong actions against those who didn’t comply with the recently concluded Voluntary Disclosure of Income Scheme (VDIS).[break]
“We have noticed unusual withdrawals from the bank, but we have no concrete idea where the money has gone,” said a banker. But he was quick to downplay the possibilities of huge capital flights. “Had there been huge capital flights, the market would have sensed a shortage of Indian currency and major convertible currencies,” he said.
However, a senior banker, who refused to be named, said the majority of withdrawers have moved their deposits to their homes and bank lockers after rumors the government will soon launch an investigation over accounts having deposits of more than Rs 5 million.
However, a senior official at the Ministry of Finance denied such rumors as baseless. “The government has no plan to investigate the sources of funds that have been deposited in the banks,” said finance secretary Rameshore Khanal.
The banker added that the already jittery market was following repeated warnings of tough action against potential tax evaders, further scaled up after the Department of Inland Revenue sent letters to 900 suspicious tax payers last week asking them to furnish details of their income and tax payment slips within 15 days.
The Ministry of Finance made public that it had booked 10,000 individuals and firms under red, identifying them as potential tax evaders. According to the Ministry, the list was prepared on the basis of information passed on by revenue offices and informers.
Likewise, the IRD during the VDIS period gathered information on people who bought land worth Rs 2.5 million or more over the last four years or owned promoter shares of banks.
According to a banker, financial institutions have seen an eyebrow-raising nine billion rupees deposit withdrawals between mid-January to March 23, almost double the normal withdrawals.
“Deposit withdrawals recorded a whopping Rs 1.8 billion between March 14 to 23 from banks, and such withdrawals between mid-January to mid-February was Rs 5.65 billion,” said the official.
Another reason for the shortage, according to the banker, is the failure of the central bank to replace the current note which is etched with the image of the former king. A high-ranking government official acknowledged that note stocks having denominations of Rs 100 and Rs 500 are limited with the bank. “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 two months.
He stressed that the present shortage of high denomination notes is a short-term phenomenon and would be resolved within one or two weeks.
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