External Affairs

Unable to Exchange Notes After Demonetisation, Nepalis Could Lose Their Savings

Nepalis had been verbally promised they would be able to exchange Rs 4,500 in old notes each, but no official decision has been sent yet on how this is to be done.

Kathmandu: Nepalis stand to lose millions of dollars held in high-value Indian bank notes that India banned last year and has yet to exchange, a Nepali central bank official said on Tuesday.

Indian Prime Minister Narendra Modi in November banned Rs 500 and Rs 1000 bank notes as part of a drive against unaccounted wealth in India that has also hit Nepal where Indian rupees are widely used.

People holding the notes in India were given a little less than two months to exchange them at banks.

In March, officials from the Reserve Bank of India (RBI) visited Nepal and promised to allow every Nepali citizen to exchange Rs 4,500 Indian rupees worth of the old notes for new ones.

“That was only a verbal assurance but no formal decision from India has come to us,” said Chinta Mani Shivakoti, a deputy governor of the central Nepal Rastra Bank.

“Even if this amount was exchanged, individuals holding more than Rs 4,500 risk losing the excess,” Shivakoti said.

Nepal depends heavily on funds from workers in India, who sent home $640 million in 2016, or about 3% of its gross domestic product.

The Indian central bank declined to comment. An Indian finance ministry spokesman also declined to comment, saying it was a central bank matter.

India fears that if it agrees to Nepal’s demand to allow Nepalis to exchange unlimited amounts, a large number of Indians may launder their ill-gotten old notes through Nepal.

Shivakoti said Nepal’s banks hold Rs 78.5 million worth of the old notes, while business officials estimate that up to Rs 10 billion in old Indian rupees may be held by individuals in Nepal’s informal sector.

Another NRB official, Bhisma Raj Dhungana, said the delay in resolving the issue was causing concern.

“India should have allowed the exchange facility much earlier,” Dhungana said.

Ordinary Nepalis say they have been hit badly by the delay.

“My savings are worth no more than waste papers. I can’t do anything about it,” said Saila Thakuri, who has Rs 8,000 in old notes sent by his son who works in a restaurant in New Delhi.