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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2708

Flip-side of Nepal’s ban on high value Indian currency

By R C Saldi - Syndicate Features

Nepal government’s decision not to allow high denomination Indian rupee notes has shocked the India bound patients and disappointed Kathmandu casino bound Indian tourist alike. Expectedly, the move has created ripples all the way from Kathmandu to Terai and beyond in Kolkata, Patna and Varanasi which are frequented by Nepalis in large numbers every day. Also amongst Indians visiting Pasupatinath temple and those on their way to Kailash. It has brought back into focus the dark memories of India’s tryst with demonetization two years ago.

On the night of eighth November in 2016, New Delhi withdrew from circulation five hundred and one thousand rupee notes; many Nepalese were suddenly left holding wads of these bills. What they did with those ‘de-recognized’ rupees and whether they could exchange them for new currency notes is a different story fit for narration some other time. Also the ifs and buts of Nepal not formally legalizing the use of 200, 500 and 2,000 notes India has introduced after demonetization. The point is demonetization by Modi government did not hinder the age-old practice of using Indian currency as legal tender in Nepal.

Nepali and Indian traders and businessmen use Indian rupees for all their transactions whether it is sale or purchase of goods and services. So do Indian tourists to Nepal and Nepali visitors to India. Also along large tracks on the porous border. Nearly 90 percent of the border trade at Birgunj (Indian side) and Parsa (Nepal side) is carried out in Indian currency. Since December 2015, the Reserve Bank of India (RBI) has been allowing travelers to Nepal and Bhutan to carry Indian currency notes above Rs. 100 denominations. This facility is, however, subject to a cap of Rs.25, 000.

Now, after the Kathmandu clamp down, the choice of Indian currency gets limited to one hundred and notes in much less face value (like fifty, twenty, ten, five et al). Trading in higher denomination of 200, 500 and 2,000 has become illegal. However, these notes are still very much in use. This is largely because of logistics burden. Carrying bundles of Indian notes is not easy. It poses its own risk to life and limbs.

Post-Indian demonetization. Nepal Rashtra Bank, has been saddled with 500 and 100 rupee notes worth nearly One Billion Indian Rupees. General public as also the likes of hotels, travel agencies and money exchangers are said to be in possession of large Indian currency that has become a worthless paper. NRB has been discussing with the RBI the modalities of their exchange with valid tender. The Nepalese government has also taken up the issue with the Modi government. No tangible solution has yet emerged and the two-year –old irritant has become a grouse of the Nepalese people against India. The Kathmandu police have recently arrested two persons with nearly 50 lakh rupees in 500 and 1,000 denominations. Where did they get this money? They had collected these notes from people in the border areas. How and why? By promising to get the ‘bad’ notes exchanged for ‘good’ notes. This one single episode illustrates the gravity of distress caused by demonetized Indian currency in the Himalayan Republic.

Against this backdrop came the 10th December decision of the Nepali cabinet against higher value Indian rupee notes. “The government has decided to publish a notice not to use, carry and keep the Indian bills of 200, 500 and 2000 denominations,” Government Spokesperson Gokul Banskota said; but no notification in this regard has been issued till the time of writing this commentary. That is not germane to our discussion but the fact that a fear psychosis has come to grip large number of people who have daily dealings with India.

Terai based Rashtriya Janata Party Nepal (RJP-N) Presidium Member, Rajendra Mahato has an interesting take. “It is a draconian decision by the Oli cabinet perhaps to pressurize India to exchange old currency notes held in Nepal but if implemented it will harm trade and tourism sectors in Nepal”, he opines. The Cabinet decision greatly affects small traders and casual labour on both sides of the border, he avers.

The Nepal government decision may also adversely impact the religious tourist arrivals from India. A Janakpur based prominent businessman points out that Indians have been making pilgrimage to Janakpur and Muktinath temples in large number following Prime Minister Narendra Modi’s visit to the two temples. The Vivah Panchami celebrations at Janakpur Dham attended by Uttar Pradesh Chief Minister Yogi Adityanath also led to a spurt in Indian tourists as well. But post- Cabinet decision, Indian pilgrim arrivals have been showing signs of slowing down, he said speaking on the condition of anonymity. “The situation may ease if Nepali citizens are allowed to keep or transact in Indian currency up to Rs. 25,000/- as hitherto”, he added.

Nepal’s entertainment industry, mainly the Casino business is also worried as its patrons are mostly Indians with fat pockets. It fears that affluent Indian tourists will no longer be able to carry large amounts to play at casinos in Kathmandu. “They will turn to alternatives in Goa or Singapore to our dismay”.

While it is difficult to perceive the motive behind the Nepal Cabinet decision to ban high value Indian currency, there is no denying its positive effect in curbing fake Indian currency flowing into India. In fact, a report in a Kathmandu publication lends credence to this line.

The Cabinet decision could have been taken at the instance of Government of India to check growing menace of fake Indian currency being pushed across the border through Nepal, the report speculated. Pakistan is the source of fake Indian currency notes. Indian Intelligence agencies have been saying for long that Pakistan has been pushing fake currency into India long through porous Nepal and Bangladesh borders. Also in public domain is the fact that Government of India is constantly in touch with Nepal government over the issue.

Both in 2014 and 2015 the Border Security Force (BSF) had seized large amounts of fake Indian currency from Nepal and Bangladesh border belts. A year later in 2016, fake Indian currency worth over ten million rupees was recovered from six persons, including a Pakistani national from Raxaul at Nepal border. Just a few days back, the Police have nabbed four members of an International Syndicate and during interrogation they admitted to smuggling fake currency worth about 70 lakh rupees to Haryana, Bihar and some other parts of the country besides the national capital region.

So the short point is that there is a plus and minus side to the Nepal government’s call to its citizens “to refrain from keeping or transacting in new Indian currency notes of Rs 2,000, 500 and 200 denominations”.. Both Governments of India and Nepal would do well to find ways to ward off the negative impact of the decision. The earlier they do the better particularly for the Terai region, which has still not forgotten the difficulties faced during the 2015 border blockade.

- Asian Tribune -

Nepal bans high value Indian currency notes
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