Why India is wary of exchanging demonetised Rs 500 and Rs 1,000 notes lying in Nepal
Nepali Prime Minister KP Sharma Oli, who arrived in India today (April 6) is expected to press India to exchange demonetised Indian currency notes lying in financial institutions and with individuals in the Himalayan country.
According to this Reuters report, the two nations have yet "to agree on how to exchange old Indian bank notes estimated to be worth $146 million [Rs 950 crore] held by individuals and informal sectors after India’s shock announcement in 2016 to ban 500 and 1,000 rupee bills".
Following PM Modi's shock announcement to demonetise Rs 500 and Rs 1,000 notes in November 2016, countries such as Nepal and Bhutan, where the Indian currency is widely used, were also caught off-guard.
Neighbourhood first! Prime Minister of Nepal K.P. Sharma Oli and Mrs. Radhika Shakya were warmly welcomed by Home Minister Rajnath Singh on their arrival in India. This is the first State visit of Prime Minister Oli after being elected as Prime Minister of Nepal. #WelcomePMOli pic.twitter.com/TKIrWYUwUe
— Raveesh Kumar (@MEAIndia) April 6, 2018
Nepalese #PrimeMinister KP Sharma Oli arrives in #India on a 3-day visit; this is Oli's first visit after getting re-elected as Prime Minister of #Nepal #IndoNepal pic.twitter.com/li8vLE5RG4
— Doordarshan News (@DDNewsLive) April 6, 2018
Back home, Indian authorities are scratching their heads as the estimates suggest that by exchanging the demonetised notes held in Nepal, the total number of invalidated currency notes of Rs 500 and Rs 1,000 denomination returned to the RBI may exceed 100 per cent and may even touch 101 per cent.
According to the RBI annual report, Rs 15.28 lakh crore, or 99 per cent of the Rs 15.44-lakh crore scrapped currency notes, have come back to the central bank and only Rs 16,050 crore hasn't. These figures are of June 30, 2017, and RBI is still counting and has not revealed the latest data.
As per law mandated by the RBI and treaties between Nepal, Bhutan and India, Nepalese and Bhutanese citizens can possess and carry Rs 25,000 to their countries through the open borders. Nepal is willing to settle for exchange of demonetised currency of Rs 4,500 per person, but the RBI has not responded so far.
Exchanging this currency will open another big window of opportunity for many unscrupulous people in India who are still saddled with the demonetised Indian currency to exchange for new.
The Nepal Police has apprehended several Indian nationals exchanging demonetised notes for much lesser amount in Nepal knowing full well that New Delhi will have to honour the treaties and exchange old Indian currency with Nepalese citizens. Nepal has been a conduit for sending high quality fake Indian currency notes (FICN) printed in Pakistan by ISI due to open border between India and Nepal.
Sources say that many people with FICN are waiting for this opportunity and a very large amount of this high quality fake Indian currency notes stuck at various places will also get exchanged in Nepal without getting detected.
In a reply in Parliament on March 16, the finance ministry has said that only Rs 35.30 crore of fake currency notes of Rs 500 and Rs 1000 denominations have been detected by the RBI during demonetisation. The worried authorities of the RBI and finance ministry say this will increase the amount of demonetised currency to be exchanged in Nepal manifolds and lead to more than 100 per cent of the invalid currency coming back to the RBI.
More than two-thirds of Nepal's total trade with India is in Indian currency and at least one-fourth of the total currency used in Nepal is Indian rupees while more than two million Nepalese work in India. The much-valued and extensively used Indian currency in Nepal that has now turned into scrap paper is also one of the factors fuelling anti-India sentiments in Nepal.
Nepal Prime Minister KP Sharma Oli has assured his countrymen that he will raise the issue of demonetised Indian currency still lying with the Nepal Rastra Bank (NRB) and the people of Nepal, during his India visit.
“The Indian demonetisation has hurt Nepali nationals. I will raise this in my meetings with Indian leaders and request them to resolve the issue,” Oli told Nepali Parliament on Tuesday.
India exchanged Rs 120 crore worth of demonetised Indian currency in Bhutan after much consternation, deliberation and delay in May 2017.
If not today, then tomorrow India will have to exchange the demonetised notes in Nepal.