RBI proposes IRs4,500 note exchange limitVisiting officials of the Reserve Bank of India (RBI) have proposed to allow Nepalis to exchange demonetised Indian banknotes worth IRs4,500 per individual.
Visiting officials of the Reserve Bank of India (RBI) have proposed to allow Nepalis to exchange demonetised Indian banknotes worth IRs4,500 per individual.
A team from India’s central bank is currently in Kathmandu to hold talks on extending exchange facility to Nepalis who are holding withdrawn Indian banknotes of 500- and 1,000-rupee denominations.
During a meeting held on Sunday with officials of Nepal Rastra Bank (NRB), the Indian team offered exchange facility via formal banking channels for up to IRs4,500 per person in demonetised banknotes.
As per the Indian proposal, individuals possessing banned Indian bills will have to deposit them in their bank accounts before NRB sends them to the RBI for verification. After the notes have been verified, RBI will send back their equivalent value in other denominations.
NRB officials agreed to the modality presented by the RBI but said the proposed amount was too small.
“We asked them to provide exchange facility for up to IRs25,000,” said Bhisma Raj Dhungana, head of the foreign exchange department at NRB who participated in the meeting.
“We told them that it was the Indian government’s decision to allow Nepalis to hold up to IRs25,000 in cash, and they should provide exchange facility up to that limit.”
The RBI delegation, however, agreed to exchange IRs33.6 million in banned banknotes held by Nepal’s financial system. The figure includes cash parked at banks, financial institutions and NRB.
The meeting ended inconclusively and the two parties have agreed to sit for another round of negotiations on Monday. “We have asked the visiting Indian team to speak with their higher authorities before the next round of talks,” said Dhungana.
The three-member Indian team is led by RBI Executive Director Deepali Pant Joshi.
This is the second time an Indian team has visited Nepal to discuss exchange facility for Nepalis holding demonetised Indian banknotes. The first team had come in the last week of February. During talks held then, the Indians had expressed fears about Nepal being used as ‘a clearing house’ to channel illegally amassed banned notes into India’s financial system.
The Indian team had returned on a positive note after being assured by Nepali officials that there was no possibility of something like that happening, according to NRB.
The Indian team’s first visit to Nepal took place a month later after a Nepali delegation led by NRB Deputy Governor Siwakoti had visited India to discuss the issue.
The Nepali team had visited India almost two weeks after the expiration of the December 30 deadline to deposit the banned notes in Indian banks. Indian authorities refused to take any decision then, and chose to visit Nepal first.
The Indian government’s move to demonetize large denomination banknotes has caused inconvenience to many Nepalis holding such bills, especially those who earn a living by working as daily-wage labourers in India, patients visiting India for medical treatment or shoppers travelling to Indian markets to buy daily essentials.
Although the amount of demonetised Indian notes in the Nepali financial system is not very high, the actual stock is expected to be much higher because Nepalis were previously allowed to carry 500- and 1,000-rupee notes worth up to IRs25,000.