Exchange of old Indian notes up to Rs4,500 allowed

The Reserve Bank of India (RBI) will allow exchange of up to Rs4,500 in banned Indian currency notes to each Nepali national, a visiting team of the Indian central bank hinted yesterday.The Indian proposal has sent waves of nervousness among the Nepali public as India had earlier allowed Nepali citizens to possess up to Indian Rs25,000 each.An RBI team led by Dipali Pant Joshi, executive director, RBI, held talks with a Nepali team, led by Nepal Rastra Bank (NRB) Deputy Governor Chintamani Siwakoti, in Kathmandu and offered to provide exchange facilities up to Rs4,500 in banned Indian currency notes and gave one week’s window to complete the exchange formalities.However, the Nepali side has been pushing to arrange facilities up to Indian Rs25,000 which was earlier allowed to a Nepali citizen to hold legally.If the Indian side remains adamant over the decision, many people who possess banned Indian rupee notes would suffer badly.After both sides stated their respective positions, the next meeting has been scheduled today, said officials at Nepal Rastra Bank, the central bank of Nepal.Similarly, the Nepali side has conveyed to the RBI team that it is also impossible to exchange banned Indian notes within a week as the Nepali side is yet to conduct inventory of banned Indian bills possessed by Nepalis.In response, the RBI team said it was ready to exchange Indian notes held with Nepali banking and financial institutions immediately but currency notes held by individuals should be exchanged through the banking system.The Indian delegation arrived in Kathmandu on Saturday to hold discussions on extending exchange facilities to Nepalis who are holding banned Indian banknotes of Rs500 and Rs1,000 denominations.This is the second time that the Indian team has visited Nepal to hold talks on allowing exchange facilities to Nepalis holding demonetised Indian bank notes.Earlier, the Indian team had expressed fears about Nepal being used as a “clearing house” to channel illegally amassed banknotes into the Indian financial system.The Indian government’s November 8 move to demonetise Rs500 and 1,000 bank notes has caused inconvenience to many Nepalis, especially daily-wage earners and labourers working in India, and those visiting the neighbouring country for medical treatment, studies and purchasing goods from Indian markets in border areas.Nepal’s central bank has been claiming that its financial system is holding Indian Rs 33.6mn at various banks and financial institutions besides NRB itself.But the actual stock of banned Indian notes is expected to be much higher because Nepalis were previously allowed to carry Indian bank notes of Rs500 and Rs1,000 denominations amounting to Indian Rs25,000.Also, those residing in areas bordering India usually keep Indian notes of higher denominations as they have to visit Indian markets frequently to buy essential commodities.