Nepal Rastra Bank (NRB) today issued directive to the concerned banks, financial institutions and money transfer companies not to use Indian Currency (IC) Rs 500 and Rs 1000 notes effective immediately.
The NRB issued the directive after the announcement of the Indian Prime Minister Narendra Modi in his televised address to the nation on Tuesday evening about the demonetization of Rs 500 and 1000 currency notes with effect from midnight.
The Indian Prime Minister also shared that the new notes of high-security Rs 500 and Rs 2000 will be soon introduced to the market.
NRB, the central bank of the country, has also made a decision to write to the central bank of India -the Reserve Bank of India – for the management of the Indian Currency notes of Rs 500 and 1000 denomination in Nepal.
The notes of IC Rs 500 and Rs 1000 denomination that will no longer be legal tender in India is bound to directly impact currency market in Nepal, the economic experts argue.
Millions of Nepalese in India and those residing and working in various bordering places between Nepal and India stretching across 1,800 kilometers are also likely to be affected from this move of the Indian government taken up to tackle black money and fake currency.
The latest move of the Indian government has also posed a challenge in the management of Indian money worth billions possessed by the Nepalese.
The provision put in place for the Indian public holding notes of Rs 500 and Rs 1000, who can deposit the same in their bank and post office accounts from November 10 to December 30 showing their passports or permanent account number (PAN), has further made it difficult for this section of Nepalese working in India but not bearing any passport or PAN.
The scrapping of Rs 500 and 1000 notes would, however, not impact to every sector in Nepal, mentioned Kalyan Bandhu Aryal, former Director of the Financial Currency Management Department of the NRB.
Aryal said that if any member of the public or hotels, shops and money exchange outlets have been reserving Indian currency notes of Rs 500 and 1000, the notes will be useless now onward, impacting overall currency market in the country.
As the black money is usually stashed in currency of bigger denomination, he further argued that the India’s latest move of demonetization will surely impact Nepal.
The non-convertible Indian currency is used in Nepal and Bhutan. Both these countries had been bringing in Indian currencies via air.
The Indian law had banned IC Rs 500 and Rs 1000 notes in Nepal since 2002 but the ban on the use of these currency notes was lifted August 2015 afterwards.
According to Narayan Prasad Poudel, Spokesperson at the NRB, the Indian currency Rs 500 and 1000 notes will be banned in Nepal once the Indian government officially notifies the NRB towards this end.
As far as the reserve of these notes in the banking system of Nepal is concerned, Poudel stressed that the NRB and the government should work in tandem to resolve the issue through the diplomatic measure.
He shared, “The NRB has already prompted deliberation on mitigating the impact of the demonetization of Rs 500 and 1000 Indian currency notes in the Nepali currency market.”
Many people in Kakadvitta – the border check point in the east – are reported to be jostling since today morning to deposit the Indian currency notes of Rs 500 and 1000 denominations in local banks.