Three weeks on, Nepal awaits India’s responseIt has been almost three weeks since the Indian government banned circulation of 500- and 1,000-rupee banknotes,
It has been almost three weeks since the Indian government banned circulation of 500- and 1,000-rupee banknotes, but it still has not responded to the Nepali government’s proposal to provide exchange facility to Nepalis holding currency of those denominations here in the country.
Following the decision to remove IRs500 and IRs1,000 notes from circulation, the Indian government had formed an inter-ministerial taskforce to scout ways to deal with this issue.
“This taskforce will also look into problems faced by Nepal and come up with a decision,” Spokesperson at the Indian embassy in Kathmandu Ruby Jaspreet Sharma told the Post on Monday. “We hope we hear from them soon.”
The Indian embassy in Kathmandu has been making such statement since Nepal proposed that the Indian government allow Nepalis to exchange the banned banknotes with legal tenders here in the country. The proposal was handed to the embassy on November 18. But nothing has happened.
This delay has affected hundreds of thousands of Nepalis holding big chunk of scrapped Indian banknotes. Many Nepalis who earn a living as daily-wage labourers in India, or those who visit the neighbouring country seeking medical treatment or rely on Indian markets to purchase daily essentials still hold those notes. Also, thousands of Nepalis on pilgrimage tours to India and those engaged in cross-border trade are said to have a big stock of now defunt Indian banknotes.
“It appears the Nepal government has not followed up on the issue seriously,” former Nepal Rastra Bank governor Yubaraj Khatiwada told the Post. “The government should call the ambassador and ask him to come up with a solution soon.”
In May 2000, the Indian government had barred individuals travelling to and from Nepal to carry the high denomination Indian banknotes. The move was aimed to curb circulation of counterfeit Indian currencies and unauthorised trade. Following the decision, Nepal had also barred the use of those notes here. But in February 2015, Nepal Rastra Bank lifted the ban on the use of Indian banknotes of 500- and 1000-rupee denominations.
The central bank’s move had followed the Reserve Bank of India’s introduction of a new Foreign Exchange Management (export and import of currency) Regulations, allowing Nepali and Bhutanese citizens to “carry Reserve Bank of India currency notes of denomination Rs500 and/or Rs1,000 up to a limit of Rs25,000”.
This means Nepalis were legally allowed to carry Indian banknotes of 500- and 1,000-rupee denominations, according to Khatiwada.
“So, the Indian government should have announced ways to address problems likely to be faced by Nepalis and Bhutanese at the time it decided to demonetise the currency,” he said.
The central bank has said 500- and 1000-rupee Indian banknotes worth IRs33.6 million is within the financial system in Nepal. The figure includes cash parked at vaults of banks, financial institutions and the NRB. But actual stock of banned Indian bank notes is expected to be much more because the Nepalis were previously allowed to carry the high denomination Indian banknotes worth up to IRs25,000.
Besides, those residing in areas bordering India usually stash the Indian notes of larger denominations as they have to frequent Indian markets to buy goods.
The responsibility of alleviating hardship faced by Nepalis also lies with the government, according to Khatiwada. “Nepalis were holding those banknotes because the government had allowed them to do so. So, the government should take some risk and address genuine concerns of genuine people, instead of skirting the issue,” he said.