Nepal's banking system holds banned Indian Currency notes of 35 million rupees

Nepal's banking system has at least held banned Indian currency (IC) notes of 500 and 1000 rupees worth 35 million rupees (524,737 U.S. dollar), Nepal's central bank said on Thursday.

After banning these IC notes from in Nepal on Wednesday, a day after India's prohibition of them there, Nepal Rastra Bank (NRB) had sought availability of such notes with Nepal's banks, other financial institutions and money changers.

"As reported by the banking institutions licensed by us, they have held banned IC notes worth 35 million rupees as of late hour of Thursday," said Narayan Poudel, spokesperson of NRB, adding that the amount could cross 40 million Indian rupees (599,700 U.S. dollar) 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. "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 1000 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 1000 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 bankReserve Bank of India 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."

Finance Secretary Shanta Raj Subedi said that his ministry has asked India through Nepal' foreign ministry whether the southern neighbour would collect the banned IC notes from Nepal and what modality it would adopt for collecting of such notes from Nepal. Endit