RBI asks Nepal Rastra Bank to provide details about Indian currency

The Nepal Rastra Bank (NRB) has been asked by the Reserve Bank of India (RBI) to provide details of the stock of Indian currency in denominations of Rs.500 and Rs.1,000 in the Nepali financial system.

The query by RBI comes following India's move to withdraw 500 and 1,000 rupee notes from circulation.

Indian Prime Minister Narendra Modi on Tuesday announced that the currency notes of Rs. 500 and Rs. 1000 denominations will not be legal tender beginning November 9 in order to crack down on rampant corruption and forged currency.

The Indian currency of Rs. 500 and Rs. 1000 denominations were also banned by the NRB effective from Wednesday following the surprise decision by the Indian Government.

The head of the foreign exchange management department of the NRB, Bhisma Raj Dhungana, said that the RBI has been informed by the central bank that around 35 million Indian rupees in denominations of 500 and 1,000 is within the formal financial system in Nepal.

"The figure is based on the details submitted by the banks and financial institutions and money changers," the Kathmandu Post quoted Dhungana as saying. "It also includes the denominations that the NRB possess," he added.

Dhungana said they are yet to receive a response on that matter.

According to officials, the stock of Indian currency with Nepalis could be much higher than the reported 35 million in the financial system.

The NRB official said that possibilities of many Nepalis carrying bank notes of these denominations are quite high as Nepali citizens are allowed to carry Indian rupees prior to this ban.

The Indian government has set a deadline of 50 days to deposit the scrapped notes at banks and postal offices so it is necessary to exchange these bank notes at the earliest.

Talks were also held on Wednesday to discuss the matter between the Indian Embassy and officials from the central bank in Kathmandu.