The Nepali government’s decision to ban denominations of Indian currency notes above (Indian Rupees) IRs 100 with immediate effect will have a huge impact on the local economy. Those most likely to be immediately affected by the ban include traders, businessmen, students, Nepalis living and working in India and Indian tourists visiting the Himalayan Kingdom.
The decision, which was made during a recent Cabinet meeting, was announced by Nepal’s Information and Communication Minister, Gokul Prasad Baskota. Baskota stated that it would now be illegal to possess and transact in all Indian notes above IRs 100 and a public notice to this effect would be issued soon.
“It is illegal to import or keep Indian rupee denominations of 200, 500 and 1,000 from today. We have decided to publish a public notice asking people not to conduct transactions in these notes, not to carry them and not to keep them,” said the minister. Baskota did not give any reason for the ban.
Narayan Poudel, Spokesperson at Rashtra Bank of Nepal, said that the decision was made at India’s request to curb fake Indian currency notes (FICN). “India’s central bank (RBI) had requested both us (Nepal) and Bhutan to a step to put a ban on Indian currencies above Rs 100,” Poudel claimed. He added that there was a high prevalence of fake Indian currency notes through the Nepal-India border so this new step was taken so as to curb transactions through them.
“After India’s request, the Nepal Rastra Bank (NRB), the central bank of Nepal, wrote to the Nepali government to impose a ban on Indian currency denominations above IRs 100,” said Poudel
Meanwhile, Baskota stated that Nepal had been transacting in Indian currency without any problem for a long time, but he complained that post-demonetisation in India, New Delhi had so far not exchanged the demonetised Indian currency notes that had been circulated within Nepal for legal notes.
The central banks of Nepal and India have held several rounds of talks to arrange the exchange facilities of Indian demonetised bank notes parked in various banks and financial institutions in Nepal. So far though, no solution has been reached. Officials said that since Nepal has received no compensation from India for not exchanging billions of Indian demonetised bank notes parked in various banks and financial institutions, this latest decision was taken to avert any possible crisis in future.
“India has so far declined to exchange those demonetized Indian notes with the new ones. This has come as a lesson for us. It is now the duty of the Nepal government to make our people aware that more such Indian currency notes available in Nepal may also face a similar fate,” Baskota said.
The Nepali Information and Communication Minister added that Kathmandu’s concerns about the exchange facilities of banned Indian bills would soon be taken up at the prime ministerial level with New Delhi.
The Nepali government’s decision affects millions of Nepali people living across the Nepal-India border. These people will be especially hit by the decision, as they mostly prefer to carry out their economic activities in Indian currency due to the open border and easy access to Indian markets. Similarly, many Nepalis working and living in India will be adversely affected by the move. Now, with this new imposition, Nepalis living and working in India will have to send money back to Nepal through electronic transactions which is called “remittance facilities” or they will have to carry notes of IRs 100 in bulk.
Tourism operators working in Nepal also say that the government’s latest announcement will hit tourism in the Himalayan Kingdom. India is the largest trading partner of Nepal and Indian tourists are the major source of income for tourism entrepreneurs in Nepal. Thus, this decision carries many ramifications for Nepal.
This is the third time that the Nepali government has put a ban on the transaction of Indian currency notes above certain denominations. The first time was in the mid-1990s when the New Delhi asked Nepal to ban high denomination notes to stop the smuggling of notes into India. Then, after the Modi government imposed demonetization in November 2016, as per the foreign currency exchange provision, India’s central bank (RBI) had requested Nepal to put a ban on currency denominations on IRs 500 and 1,000. Also, immediately after the demonetization move in 2016, the central bank of Nepal stated that IRs 25,000 would be the maximum limit that could be carried by a Nepali national.
Poudel believes the ban on carrying Indian bank notes above IRs 100 would not have that huge an impact on the general public. “No one carries cash these days,” he said. “Be it a businessman or trader or tourist, they use cards.”
But Nepal’s businessmen are not convinced. “Facilities for swiping card is not available everywhere,” counters Narayan Sharma a businessman based in Thamel, a commercial neighbourhood located in Kathmandu. Sharma believes that not just Nepalis the decision will also have a huge impact on Indian tourists. Now, Nepalis living in India will now face difficulties in repatriating their earnings while Indian tourists visiting Nepal will have to carry bulk of paper money in Nepal. With this decision, travel agents say that Indians will also have to carry dollars or Euros in Nepal if they want to spend more days here.
This cumbersome carrying of paper notes may cause Nepal to lose thousands of Indian tourists, especially mostly those who love to visit Nepali casinos. Then, Indian traders and businessmen who do trading and business in Nepal, students and Indian people living and working in Nepal also carry such notes. But the most affected people will be those living on the Nepal-India border.
A Nepali businessman, identifying himself as Guru, who does business along the Nepal-India border, confirmed people living across the border will suffer from the decision. “I meet thousands of Nepali people returning from India carrying Indian currency denominations of IRs1,000, 500 and 200. With this new rule, they will suffer and remittance from India will be hit badly,” said Guru. Also, according to some local media reports, after the decision to ban Indian currency denominations, many towns and markets in west Nepal have complained about a decrease in trade.
(The author is a senior journalist with The Kathmandu Post. Views are personal.)
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