Laxmi Capital News
Two and half years on, Nepal still await exchange facility

KATHMANDU : As Indian Prime Minister Narendra Modi beginshis third Nepal visit in four years from Friday, Nepalis are still awaitingexchange facility for demonetized Indian banknotes in their possession.

The abrupt decision of the Modi government to scrapbanknotes of 1,000 and 500 denominations two and half years ago turned theIndian currency in possession of Nepalis into 'worthless paper' as the southernneighbor remains reluctant to provide exchange facility to Nepal.

Nepalis are legally allowed to carry up to Indian Rupees(IRs) 25,000. Indian Prime Minister Modi himself signed an agreement with hisNepali counterpart during his first state visit to Nepal in 2014, lifting aprohibition on circulation of 500 and 1,000 denominated Indian currency thathad been in place since May 2000.

“Lifting of this prohibition will facilitate remittances,movement of people across the border and facilitate tourism,” read thestatement issued by the Indian Government at the end of Prime Minister Modi'svisit.

Despite allowing circulation of high value Indianbanknotes, the Indian government has not yet swapped such banknotes in theaftermath of demonetization.

Following initial assurances from the Indian governmentto provide exchange facility, authorities of the two countries even held anegotiation toward finding solution to the problem. However, the Indiangovernment is lately shying away from discussing the matter, according to asource at the Ministry of Finance (MoF) of Nepal.

“The Indian side has not responded to the letter that theNepal Rastra Bank (NRB) sent after the negotiation held with a team of Indiandelegates who had agreed to provide exchange facility for up to IRs 4,500 perindividual,” said the source.

A team of Reserve Bank of India (RBI) led by one of itsexecutive directors, Dipali Pant Joshi, had come to Nepal on March 26 last yearand held talks with Nepali officials on providing exchange facility for Nepalinationals holding demonetized Indian banknotes up to IRs 4,500. Nepaliauthorities, who were initially demanding exchange facility for up to IRs25,000, later agreed to accept the upper limit set by the Indian side. However,Indian government has not responded to Nepal's request for providing exchangefacility for IRs 4,500 as proposed by them.

“There were some fears that Nepal could be used as aclearing house to channel illegally amassed Indian banknotes. But, the Indianteam seemed to be convinced that the modality we proposed would not allow suchpossibility,” a high-level Nepali official, who participated in the discussionheld with the Indian team, told Republica.

NRB Executive Director Bhisma Raj Dhungana told Republicathat the banking system of Nepal holds IRs 80 million worth of demonetized1,000 and 500 rupee bills. There is no estimation of the scrapped Indianbanknotes in possession of traders and general public.

The issue of demonetized banknotes has been featuring inthe agenda of the visit of Nepali Prime Ministers to India. However, the Indiangovernment has not given any concrete response to the request, according to theMoF official.

Source : My Republica, 11th April 2018

 

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