Kathmandu: India’s decision to demonetise Rs 500 and Rs 1,000 currency notes had its ripple effect in Nepal — affecting transactions, depressing the share market, creating difficulties for border residents and raising concerns among citizens working in India.
Nepal’s central bank, Nepal Rastra Bank (NRB), issued a directive to all banks, financial institutions and money transfer companies to immediately halt the transactions of Indian currency of these denominations with effect from Wednesday.
The bank, which said it is in touch with its counterpart, the Reserve Bank of India, to resolve the problem, also discussed the issue with government officials.
Reports in Nepali media suggested that people living in bordering areas are facing difficulties following the ban.
Indian currency covers 20 percent of total monetary transactions in Nepal. With the Indian decision, the local share market in Nepal decreased by 27 points.
The NRB may give 15 days time for those holding Indian currency notes of these denominations to exchange them from local financial institutions.
Indian currency is the second-most used after the local Nepali rupee, while more used than the Nepali rupees for trading purpose in southern plains abutting India, due to huge trade dependency with India.
The demonetisation is also bound to directly impact currency market in Nepal, say economic experts.
Nepal had banned use of Indian Rs 500 and Rs 1000 notes due to a number of counterfeit cases, and according to an Indian request. The Indian ban on use of its Rs 500 and Rs 1000 was removed in August last year, with Indian citizens allowed to carry such notes up to Rs 25,000 worth.
The Nepalis who go for pilgrimage, study or treatment in India or are engaged in trade will be also affected by the decision, as well as the millions residing or working in India or along the 1,800-km-long border.
While Indians having Rs 500 and Rs 1,000 can deposit the same in their bank and post office accounts between November 10 to December 30, or change it after providing proof of identity, Nepalis working in India do not possess such Indian documents.
The move has also raised questions about Indian currency amounting to billions held by some Nepalis.