The largest umbrella body of the private sector has urged the government to use the diplomatic channel to clear the confusion over replacement of now-useless Indian currency of 500 and 1,000 denominations held by Nepalis with legal bills.

Nepali traders residing in districts along Nepal-India border points and others who work in India or visit the neighbouring country for medical purpose are estimated to be holding banned Indian bank notes worth billions of rupees, the Federation of Nepalese Chambers of Commerce and Industry said in a statement issued on Sunday.

“Some of these people are likely to lose all their earnings if they fail to get exchange facility on time. The focus of these people have now diverted from day-to-day works to finding out ways to replace bills that have been pulled out of circulation by the Indian government [with legal bank notes],” says the statement. “So, the government must address this issue by using diplomatic channel to hold talks with the Indian government.”

Indian Prime Minister Narendra Modi on Tuesday announced that 500 and 1,000 rupee notes would be withdrawn from circulation effective Tuesday midnight “to crack down on rampant corruption and counterfeit currency”. Following the Indian government’s surprise decision, the NRB also banned the use of those bank notes in Nepal from Wednesday.

It is essential to exchange these bills at the earliest as the Indian government has set a deadline of December 30 to deposit the scrapped notes at banks and postal offices.

The Indian government has said people who have accounts in Indian banks need not worry as the financial institutions will provide them the currency exchange facility. But many Nepalis who own the banned notes do not have accounts in Indian banks.

Nepal Rastra Bank (NRB), the central bank, has already requested the Indian central bank to make an arrangement so that Nepalis can exchange the now-useless Indian banks notes with valid tender here in Nepal. The Indian central bank, according to NRB, has forwarded the proposal to the Indian Finance Ministry.

Nepal Rastra Bank has said around IRs35 million in the denominations of 500 and 1,000 is within the financial system in Nepal.

The figure is based on the details submitted by the banks and financial institutions and money changers.

It also includes the stock of banned IC notes that the NRB possesses.

Prior to the ban, Nepali citizens were allowed to carry Indian 500 and 1,000 rupee Indian currency worth up to IRs25,000. So, chances of stock of banned bills exceeding IRs35 million are high, according to NRB officials.

Also, those residing in areas bordering India usually stash Indian notes of larger denominations as they have to frequent Indian markets to buy goods.