There were so many people wanting Indian banknotes that the counter could not fulfil demand, and desperate India-bound travellers and shoppers often turned to the black market.

The central bank's Bhairahawa branch now has adequate stocks of Indian currency, but there are few takers. Demand for Indian banknotes has plummeted of late, and the more than three dozen exchange counters in the city are deserted. Business has dried up for the once thriving illegal money changers too.

“Buying Indian currency has become risky,” said Chandrakant Adhikari, operator of Lumbini Money Changer. “There are no customers asking for Indian notes.”

According to Adhikari, demand has plunged for the first time during his three decades as a money changer, and he will have to shut down his business if the trend continues.

Lumbini Money Changer used to sell Indian banknotes worth Rs10 million per day to over 200 customers. Currently, less than 15 customers walk in through the door daily; and more people come to sell, not to buy, Indian currency.

The exchange rate of the Indian rupee is Rs1.60. When demand was high, illegal changers were charging Rs1.65. Thousands of customers who hop across the Nepal-India border to Sunauli for shopping purposes reportedly even paid Rs1.67.

Illegal money changers now only give Rs1.57 for one Indian rupee. Some have even stopped exchanging Indian banknotes.

Nepal Rastra Bank's Siddharthanagar branch also reported a drop in demand for Indian currency. It used to sell Indian currency worth Rs2 million daily. The daily turnover has now slumped to Rs300,000.

“Collection of Indian currency has increased,” said Krishna Bhattarai, chief of central bank’s Siddharthanagar branch. “The accumulation used to be marginal earlier, but the branch has witnessed a collection of IRs2.6 million till December.”

Nepal Rastra Bank only exchanges Indian banknotes of Rs100 denomination. The central bank pays for its Indian currency purchases in US dollars.

There is no official explanation for the decline in demand for Indian rupees. According to experts, the inflow of Indian currency has increased because of Indians who have acquired Nepali citizenship paying for real estate in Indian currency.

People who need Indian currency for travel, health and education purposes have been getting it through banks instead of buying it from money changers. An increase in the number of Indian gamblers at casinos based in Bhairahawa has led to more Indian currency flowing into Nepal, they say.

Smuggling of gold, pepper and betel nut from Nepal to India has also increased the supply of Indian banknotes. “The abundance of Indian notes suggests smuggling of goods from Nepal to India,” said Adhikari. “The market is seeing more Indian notes also because of an increase in the number of Indian citizens visiting Nepal’s casinos of late.”