Exchange of Banned Indian Notes Still an Issue for Nepalese

July 19, 2017

Nepalese are still facing consequences of the Indian Government’s demonetization drive, and are yet to exchange their high-denomination Indian bank notes (Rs 1000 and Rs 500) banned by the Indian Government.

According to a central bank official, ‘Nepalese stand to lose millions of dollars held in high-value Indian bank notes that India banned in 2016’.

The Indian Government had given two-month time for Indians to exchange their high-denomination notes with the new ones. But, Nepal has no such formal intimation from the Indian Government on the issue.

The Reserve Bank of India, in its Nepal visit in March, promised of allowing every Nepali individual to exchange old notes worth INR 4,500 (USD 70) with the new ones.

“That was only a verbal assurance, but no formal decision from India has come to us. Even if this amount was exchanged, individuals holding more than INR 4,500 risk losing the excess,” says Chinta Mani Shivakoti, a Deputy Governor of the Nepal Rastra Bank.

No Response from Indian Officials

Bhisma Raj Dhungana, another NRD official, says the delay in resolving the issue is causing a concern. “India should have allowed the exchange facility much earlier,” he added.

While RBI officials failed to respond on the issue, an Indian Finance Ministry spokesperson skipped saying, “it’s a central bank issue”.

The Indian Government is worried that Indians may try to launder their old notes through Nepal, if Nepalese are allowed for unlimited currency exchange.

According to Shivakoti, Nepali banks hold INR 78.5 million worth old currency notes. Whereas, Rs 10 billion of old Indian currency ($155 million) is stashed with the Nepali informal sector, estimate Nepali businessmen.