Nepal's banking system holds banned Indian currency notes

Kathmandu, Nov 11: Nepal's banking system has held banned Indian currency (IC) 500 and 1,000 notes worth Rs 35 million ($524,737).

"As reported by the banking institutions licensed by us, they have held banned IC notes worth 35 million rupees as of Thursday," said Narayan Poudel, spokesperson of Nepal Rastra Bank (NRB), adding that the amount could cross Rs 40 million ($599,700) once remaining a few banking institutions send their details about the stock of such notes.

However, Nepalese central bank believes that the traders and general public living in bordering areas with India as well as Nepalese migrant workers who had returned from India might have held huge amount of these notes, Xinhua news agency reported. 

"We don't have record of IC notes held by general public," said Poudel.

The IC notes denominated upto 100 rupee has long been freely exchangeable in Nepal. 

But, India had allowed Nepal to use IC notes of 500 and 1,000 rupees last year only after Nepal made request to its southern neighbour for such provision considering easing Nepalese migrant to carry Indian currency notes while returning home. They were facing the risk of being robbed on the way while carrying large bundle of low denominated IC notes.

After India allowed Nepal to use of IC notes of 500 and 1,000 rupees last year, the Himalayan nation had allowed Nepalese migrant workers and Indian nationals to carry such notes upto 25,000 rupees in Nepal.

Sudden Indian decision of banning the use of these notes left shockwaves across Nepal's banking sector as well as people around the bordering areas and migrant workers' families. Officials of NRB and Nepalese banks said that they were getting constant inquiries from people whether the IC notes held by them would be exchanged.

Meanwhile, Nepal's central bank has asked Indian central bank Reserve Bank of India (RBI) to make arrangement for exchanging the banned notes available with Nepal's banking system as well as the cash held by people upto 25,000 rupees.

"We have written the RBI for making exchange of legally available stock of such IC notes in Nepal," said Basudev Adhikari, director of foreign exchange management department at NRB. 

"We have also written to Nepal's Finance Ministry for making diplomatic initiative with India for settling the issue."