Nepalis, saddled with banned Indian rupee notes, risk losing savings

Nepalis stand to lose millions of dollars held in high-value Indian bank notes that India banned last year and has yet to exchange, a Nepali central bank official said yesterday.

Indian Prime Minister Narendra Modi in November banned 500 rupee ($7.77) and 1,000 rupee bank notes as part of a drive against unaccounted wealth in India that has also hit Nepal where Indian rupees are widely used. People holding the notes in India were given a little less than two months to exchange them at banks.

In March, officials from the Reserve Bank of India (RBI) visited Nepal and promised to allow every Nepali citizen to exchange 4,500 Indian rupees ($70) worth of the old notes for new ones.

“That was only a verbal assurance but no formal decision from India has come to us,” said Chinta Mani Shivakoti, a deputy governor of the central Nepal Rastra Bank. “Even if this amount was exchanged, individuals holding more than 4,500 Indian rupees risk losing the excess,” Shivakoti said. Nepal depends heavily on funds from workers in India, who sent home $640 million in 2016, or about 3 percent of its gross domestic product. The Indian central bank declined to comment. An Indian finance ministry spokesman also declined to comment, saying it was a central bank matter. India fears that if it agrees to Nepal’s demand to allow Nepalis to exchange unlimited amounts, a large number of Indians may launder their illgotten old notes through Nepal.

Shivakoti said Nepal’s banks hold 78.5 million Indian rupees worth of the old notes, while business officials estimate that up to 10 billion in old Indian rupees ($155 million) may be held by individuals in Nepal’s informal sector. Another NRB official, Bhisma Raj Dhungana, said the delay in resolving the issue was causing concern. —Reuters