Demonetisation impact: delay in currency exchange irks Nepal

Kathmandu not to accept high-value Indian notes sans New Delhi’s assurances against future shocks.

Published - January 11, 2019 08:46 pm IST - NEW DELHI

External Affairs Minister Sushma Swaraj greets her Nepali counterpart Pradeep Kumar Gyawali in New Delhi on January 10, 2019.

External Affairs Minister Sushma Swaraj greets her Nepali counterpart Pradeep Kumar Gyawali in New Delhi on January 10, 2019.

Upset over continued delays from New Delhi in exchanging demonetised currency, Nepal says it will not accept high-value Indian notes until the government gives specific assurances against future shocks.

Pending for 2 years

Explaining the Oli government’s recent move to ban all Indian currency notes above ₹100, Foreign Minister Pradeep Kumar Gyawali said India was yet to respond to Nepal’s two-year old demand for the return of more than ₹7 crore held officially by the Nepali Rastra Bank (NRB).

“We have asked the Indian government on several occasions to settle the problem,” Mr. Gyawali told journalists during a visit to Delhi.

“We have now decided that on the use of high value [Indian] currency, we will not allow it until we get an assurance from the Indian government that in the future we won’t be left with all these problems,” he added.

The Minister said the Oli government had been “raising the issue regularly” with the Modi government.

Remittances hit

When ₹500 and ₹1,000 notes were demonetised on November 8, 2016, neighbouring countries where Indian currency is used, like Bhutan, Nepal and Myanmar, were left holding large sums of the demonetised currency. While India has subsequently settled the issue with Bhutan, it is yet to respond to Nepal’s requests, officials told The Hindu .

Nepal was particularly affected by demonetisation, officials said, as the Indian currency is used in daily transactions and many Nepalis working in India take remittances and savings in cash across the border. Recent reports that India has stopped printing the ₹2,000 denomination notes has spurred speculation that they might also be demonetised, worrying people in Nepal, they added.

During his visit to Delhi in May, Prime Minister Oli had raised the issue with Prime Minister Narendra Modi as well, telling journalists afterwards that he had requested India to “facilitate the exchange of demonetised currency notes held in the Nepali banking system and by general public, at the earliest.”

Earlier, in March, Finance Miniser Arun Jaitley had announced that Nepal would soon get exchange facilities for the demonetised high-value Indian currency notes.

MEA silent

The MEA did not respond to a query on Nepal’s demand had still not been met. When asked about Mr. Gyawali’s comments, the MEA spokesperson said the Nepal Rashtra Bank’s communication earlier this month (banning high-value currency until assurances were given) was being examined by “concerned authorities in the Reserve Bank of India”.

Mr. Gyawali hoped the situation would be resolved, and expressed “satisfaction” with his talks on other issues with External Affairs Minister Sushma Swaraj. He said in particular Nepal was grateful to the government for recognising electricity as a tradable commodity according to the revised guidelines on Cross-Border Trade in Electricity (CBTE). The change has allowed neighbouring countries like Nepal, Bhutan and Bangladesh to join the Indian energy exchange.

“Given our hydropower potential, this is a very important decision for us. During PM Oli’s visit, we had also proposed a model for energy banking where Nepal and India can use each other’s surplus power when needed,” Mr. Gyawali said. He added that movement on inland waterways system that would allow Nepali rivers to link to the Ganga waterways would enhance Nepal’s trade transportation.

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