Kathmandu, May 22 :

Dr Y V Reddy, governor of Reserve Bank of India (RBI), today revealed that India would review the issue of Indian currency of 1,000 and 500 denominations in Nepal, which is currently not in use in Nepal. Dr Reddy said that he would discuss with the governor of Nepal Rastra Bank (NRB) Bijaya Nath Bhattarai the issue of usage of these denomination notes in Nepal.

Dr Reddy, addressing the 35th Asian Clearing Union (ACU) Board of Directors meeting that began in the capital today, said that due to its strong institutional foundation, Indian economy in recent years has got a remarkable boost.

Highlighting India’s success in economic development, Dr Reddy said, “Democracy and free press have turned out to be effective means to boost Indian economy.”

“Press has helped to strengthen democracy and gradual acceleration of economic growth,” said Reddy adding that ‘volatility in economy’ is considered less at present. “Moreover, gradual liberalisation has also helped to make economy more competitive,” he said.

Talking about Indian plan to go on full convertibility, Dr Reddy said that India is planning to go gradually on capital account convertibility for which a committee of experts has been formed. When asked him about its impact on Nepali economy, he said, “Before going to full convertibility, we will consult with Nepal and even after landing in such a mechanism, Nepal will have a sound position to benefit from Indian economy.”

According to senior NRB officials, who requested anonymity, “Going into capital account convertibility means to make economy more advanced in a changed globalised context, which will help to make Nepali economy more reliable to the world.” They said that the main objective of full capital account convertibility is to incre-ase investment in the country as per demand and supply system. For Nepal, going into full converti-bility would turn out to be beneficial for investors at home and abroad, removing all restrictions.

Bijay Nath Bhattarai, NRB governor stressed on the need to enhance cooperation among the member central banks and financial institutions through ACU in order to make the organisation m-ore effective in facilitating the intra-regional trade. He said that AC-U secretariat is examining the issue of Real Time Gross Settlement System. He commented that countries, who are committed to international trade differ in regard to their levels of financial sector development, capital account convertibility and structural benchmarks and they are at different levels of preparedness for providing clearing arrangements. He sought to expand ACU for trade promotion, economic cooperation and regional development.

Dr Ranee Jayamaha, deputy governor of Central Bank of Sri Lanka, on the occasion, said that trade and services are now being promoted by the government themselves regardless of the existence of the ACU. He said, “There is a growing demand for an efficient clearing service, speedy settlements, prompt dissemination of information necessary to improve users’ liquidity, management to elevate the ACU mechanisms to a modern clearing system that helps in reducing transaction costs.”