RBI forms unit to help exchange banned notes for Nepal and Bhutan

HT, 18 Nov 2016, KATHMANDU: The Reserve Bank of India has formed a task force to facilitate the exchange of Indian bank notes of `500 and `1,000 after they were pulled out of circulation on November 8.

The Nepalese side was told that the task force will come up with a modality to address the problems faced by people of countries like Nepal and Bhutan, where the circulation of the banned Indian notes is high, according to Nepal Rastra Bank (NRB), the central bank of Nepal. Indian currencies are exchangeable in Nepal and Bhutan, and it came to light that billions of rupees are stuck in the banking channel. After the ban, Nepal PM Pushpa Kamal Dahal Prachanda, finance minister Krishna Bahadur Mahara, and NRB governor, Chiranjibi Nepal, spoke with their respective Indian counterparts — Narendra Modi, Arun Jaitley and Urjit Patel.

An NRB statement said that Patel informed his Nepalese counterpart about the formation of the task force. Other senior NRB officials also spoke with the RBI on a daily basis to avert the crisis.

On Thursday, a Parliamentary panel also urged the Nepal government to take all necessary steps to facilitate the exchange of Indian currency possessed by Nepal residents.

Hundreds of thousands of Nepalese, who earn a living by working as daily-wage labourers in India, those who visit India for medical treatment or rely on Indian markets to purchase daily essentials, are said to be holding scrapped notes. Besides, people who visit India as pilgrims and those engaged in cross-border trade have kept a stock of the banned notes.

The NRB said that `33.6 million in denominations of `500 and `1,000 is within the financial system of Nepal. The figure includes cash parked in vaults of banks, financial institutions and the NRB. But the actual stock of banned banknotes is expected to be much more because Nepal residents were previously allowed to carry `500 and `1,000 banknotes worth up to `25,000.

The Indian government has said people who have accounts in Indian banks need not worry as financial institutions will provide them the currency exchange facility. But many Nepal is who own the notes do not have accounts in Indian banks.