Kathmandu, November 19
The government is trying to assure the government of India that the country will develop stringent rules for exchange of high denomination Indian bank notes in Nepal and that the country is committed to backing the southern neighbour’s fight against ‘black money’.
After the Indian government’s sudden decision demonetising INR 500 and INR 1,000 notes to counter the parallel economy in India, Nepal has been seeking a way to surrender these notes in circulation here. Circulation of high denomination Indian currency in Nepal became possible after the government formally legalised import and export of Indian banknotes of 500 and 1,000 denominations in February last year.
A committee formed under the deputy governor of Nepal Rastra Bank has started groundwork on plugging loopholes and designing effective ways to ensure that only genuine people avail of the exchange facility.
The committee led by NRB Deputy Governor Chintamani Shiwakoti comprises Ananda Poudel, joint secretary of Financial Sector Management Division under the Ministry of Finance; Bhisma Raj Dhungana, executive director of Foreign Exchange Management Department at NRB; Janak Bahadur Adhikari, executive director of banking office in NRB; Anil Shah, president of Nepal Bankers’ Association; and Krishna Raj Lamichhane, president of Development Bankers’ Association. They have started work on developing an effective mechanism where chances of fraud will be nil.
“We are developing a form in which a person wishing to exchange high denomination Indian notes will have to give details of the past three generations, disclose source of income and declare that the information is genuine,” according to Shiwakoti. “Anyone found giving wrong information will be penalised under the Foreign Exchange (Regulation) Act of the country.”
As per Shiwakoti, if the government of India allows the Reserve Bank of India to provide the exchange facility to Nepal, the central bank here will issue a notice to the public holding high denomination Indian banknotes to deposit the amount mentioned in the notice in their bank accounts. The banks will then report to NRB how much money was deposited, along with the number of notes.
The central bank says it is planning to develop a system for cross-checking and ensuring that a single individual does not deposit Indian banknotes in multiple banks and those trying to do the same will be barred from the exchange facility, according to the NRB deputy governor. “However, the accounts of local account holders will be debited with the amount equivalent to the Indian currency they have deposited only after RBI releases the money to NRB,” Shiwakoti added.
Shiwakoti asserted that considering the Indian government’s serious efforts to counter the parallel economy, the central bank will deal with the matter seriously. According to him, his team has already held a few rounds of meetings with high-level officials of the Indian Embassy in Kathmandu to discuss various ways of preventing fraudulent activities while providing exchange facility on INR 500 and INR 1,000 that are in Nepal.
A version of this article appears in print on November 20, 2016 of The Himalayan Times.