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WHAT JUST HAPPENED?
The Nepal government has decided to ban the use of high denomination Indian currency notes and use only Rs 100 notes in the country now onwards Rs 200, Rs 500 and Rs 2000 The decision was announced by Nepal government’s spokesperson and Minister for Information and Communications Gokul Prasad Baskota.
WHAT JUST HAPPENED?
The Nepal government did not make any announcement when new notes were introduced by the Indian government in 2016. The decision is expected to affect Nepalese labourers working in India as well as Indian tourists frequently visiting Nepal.
REASON?
The decision comes as the Nepal government is making preparations to celebrate 2020 as the ‘Visit Nepal Year’. Estimates indicate that at least 2 million people will visit Nepal in 2020, the bulk of them from India.
IMPACT OF DEMONETISATION
Immediately after the demonetisation in November 2016, Nepal Rastra Bank declared that there was Rs33.6 million worth of demonetised banknotes in Nepal’s formal banking channels. Due to an open border and unregulated flow of people between the two countries, it can be expected that much larger sums are under informal possession inside Nepal. Since there are millions of Nepali workers in India who send remittance home and there is almost free convertibility of IC in Nepal
NOTES
Two days after India announced the withdrawal of the high-value currency notes in November 2016, the Himalayan nation said that the Nepal Rastra Bank and other financial institutions held around Rs 3.6 crore. However, there is no certain information about the amount held by ordinary Nepalis, with the estimates varying from Rs 300 crore to Rs 10,000 crore.
TRAPPED WITH A LOT OF CASH
Nepal and India have discussed the exchange of the old currency notes a number of times with Nepal asking for a currency swap According to the RBI’s annual report for 2017-18, 99.3% of the scrapped notes, technically known as ‘specified bank notes’ (SBNs), have been returned to the formal banking system. It means that just a little over Rs 10,000 crore out of the Rs 15.41 lakh crore still remain in circulation or at least, unaccounted for.
THERE EXISTS A SIMILAR ISSUE WITH BHUTAN
BHUTAN
The Royal Monetary Authority (RMA) of Bhutan has warned Bhutanese citizens of the risks of holding Indian currency, saying that it would not be responsible for any future actions — such as demonetisation — taken by the Reserve Bank of India. RMA has advised the citizens to deposit all their Indian currency in the banks and not to hold it in cash.
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