Once-abundant Indian rupee now a rare sight in Nepal

March 24, 2014 12:25 am | Updated May 19, 2016 10:55 am IST - Kathmandu:

About a hundred people line up near the Kumari temple in Thapathali in the capital every morning on weekdays. They have gathered not to pray at the temple but to exchange currency — INR 3,000 by paying 15 paise per hundred rupees.

What was once easily available to the people is now as scarce as drinking water in Kathmandu and elsewhere.

The government’s recent hike in petroleum products and its subsequent partial rollback after student organisations’ protest has highlighted yet again the precarious reserve of Indian currency in Nepal.

The Nepal Oil Corporation owes nearly nine billion Nepali Rupees (over INR 5.5 billion) to the Indian Oil Corporation (IOC) for imports of petroleum products. The payment is done in Indian currency.

According to the Nepal Rastra Bank, trade deficit with India — Nepal’s biggest trading partner — increased by 26.8 per cent to NRs 190.95 billion in the first six months of the current fiscal year. The Himalayan country’s total deficit in the same period stood at NRs 289.62 billion.

Bhakta Bahadur Shrestha from Ramechhap district, was in queue to get the 3,000 rupees. “I am travelling to Jharkhand State to process my father’s life insurance policy,” Mr. Shrestha told The Hindu. His father used to work in the eastern Indian Sate.

Since Rs. 3,000 is not enough, most repeat the exercise on the following days. The Hindu came across a man in mid-50s who identified himself as Harinath Nayaran from Sarlahi district who was in the queue for a second day.

“I am here to get the Rs. 3,000 since I’m leaving for my village soon,” said Mr. Narayan. His village is close to the India-Nepal border and many Nepalis go across the border to the markets in India to buy goods — from food grains to clothes to toys.

Farida Khatun from Darbhanga in Bihar says, “I have been standing here for over two hours now and worried about my sick grandson whom I have had to leave behind.” She and her brother-in-law, Md. Mahmud, who live in Nepal’s capital, have already done many rounds as “3,000 rupees is not enough to cover our forthcoming needs.” Ms. Khatun’s son is getting married in Darbhanga soon and they need Indian currency but the tightening on the transaction has hit her hard.

A decade-and-a-half ago, the Indian currency or IC as it is popularly known in the country was ubiquitous. But now it’s not so.

The shortage of Indian 100-rupee note (the use of 500- and 1,000-rupee notes are banned in Nepal as per India’s request) is so acute across Nepal that people are willing to pay more than the fixed exchange rate set by the Nepal Rastra Bank (NRB), the central bank.

In fact, one major reason why the NRB was set up in 1956 was to control the use of free-flowing Indian currency in Nepal.

The currency shortage became acute after private banks almost stopped providing it to people. Most banks used to make it available to at least its account holders if they provided travel documents or tickets, and in several instances, even without these. The Bishal Bazar in the heart of capital — once the favourite haunt of Indian rich during pre-1990 liberalised era — used to have an exchange counter where one could get the Indian currency. The exchange has stopped.

Why this shortage?

Anil Shah, CEO of Mega Bank, says that there has been huge, illegal outflow of the Indian currency in the last five to six years. People bought it not just in Kathmandu and elsewhere in the country, but also withdrew large amounts through ATMs in India. Now there is a daily limit of INR 10,000 not exceeding a withdrawal of one lakh a month.

“The authorities have not been able to check the flight of millions of Indian currency but have focussed on ordinary citizens,” Mr. Shah told The Hindu.

Also, the Nepali currency is freely convertible in Nepal only, the CEO pointed out. “No Indian bank will provide Indian rupee by accepting Nepali currency.”

NRB spokesperson and one of its executive directors, Bhaskar Mani Gnawali, admits that close ties between the people of Nepal and India have led to continued demand for the Indian money. However, he denies that the NRB regulations have made the Indian rupee out of reach for commoners.

“How many central banks and governments in the world make a foreign currency available to people the way we do?” asks Mr. Gnawali. “Indian currency is available for small expenses,” Mr. Gnawali said adding that “those requiring bigger amounts also can get it, provided they demonstrate the need and proper documents for it.”

Md. Mahmud, a Kathmandu resident, says: “We want both Nepal and India governments to ensure that we do not face any problem.”

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