Nepal's central bank reduces INR exchange limits, awaits response from India's RBI

The Nepal Rastra Bank (NRB) has reduced the exchange limit of Indian to Rs.2000 from Rs.5000 after India introduced new bank notes of Rs.500 and Rs.2000.

On Thursday, the NRB also requested the public not to use newly introduced currency notes of Rs.500 and Rs.2000, terming it "illegal", and added that any ratification of bank notes has to be done as per the Foreign Exchange Management Act.

The NRB has written a letter to the RBI to faciliate Nepal with the new bank notes.

After Prime Minister Narendra Modi declared old bank notes of Rs.500 and Rs.1000 as illegal tender, Nepal has stopped the exchange of Indian bank notes exceeding Rs.100. Nepal has also sent the letter to the RBI regarding the matter.

It is estimated that 21.9 per cent of Nepal's Rs.1039.21 billion foreign exchange reserve is in Indian currency.

The NRB also have formed an committee to recommend to the Indian government about the procedures to be adopted for the exchange of Indian currency.

"At the moment, we are in touch, our governor is in touch with the governor of the Reserve Bank of India. We have constituted a working group to recommend to Indian government what could be the procedures for exchanging Indian currency of 500 and 1000 rupees after the Indian Government gives us the approval.

So far, we already have sent the modalities and the documents which could be required to exchange these currency," Director and Deputy spokesperson of the NRB Rajendra Pandit said.

The Rs.500 and Rs.1000 Indian bank notes which were banned in Nepal till 2015 was lifted one-and-a-half years ago after lifting the ban on Nepalis carrying upto Rs.25,000 in Indian currency for general use.

With the declaration of demonetisation in India, Nepali banks have also stopped accepting Indian currency temporarily.