Nepal to have strong system for exchange of demonetized notes

Nepal's central bank has assured the RBI that it will introduce strong vetting process for those coming to exchange demonetized Rs 500 and Rs 1000 notes in the country and ensure that the system is not misused.
A two-member RBI team had arrived here on Tuesday to hold talks on management of demonetized Indian notes possessed by Nepali banks and financial institutions as well as the public.
The team held discussions with the officials of Nepal Rastra Bank (NRB) and representatives of commercial banks on a range of technical issues on providing exchange facility for demonetized Rs 500 and Rs 1000 Indian currency notes in Nepal.

The team, which included members from the currency management department and supervision department of the RBI, held discussions on various issues including bank account opening process, anti-money laundering safety provision, banking regulation and laws, according to officials here.
"The team held discussions with the officials of the NRB as well as bankers. They are going to prepare a technical report based on their observations and discussions with us and submit it to the RBI," said Bhisma Raj Dhungana, executive director at the NRB, the central bank of Nepal.
"They told us that they would submit their report and the Indian government will take a decision on providing exchange facility for Nepal after studying the report," said Dhungana, who also heads the Foreign Exchange Department of the NRB.

While the team seemed to be positive towards providing exchange facility, they also expressed concern over the possibility of some Indian nationals, who hold black money, misusing the facility provided to Nepal.

"We have tried to assure the RBI officials that the central bank will have strong vetting process for those coming to exchange such banknotes so that nobody could misuse the facility," the official added.
In the second week of January, a team led by NRB Deputy Governor Chintamani Shiwakoti had visited India as part of the efforts to return demonetized banknotes.
The team had proposed a modality for providing exchange facility for those who hold such currency in Nepal.

According to the NRB, nearly 33.6 million Indian rupees in Rs 1,000 and Rs 500 banknotes are currently in the Nepali banking channel. However, it is not known how much such banknotes are in the hands of Nepali traders, families of migrant workers and the general public.
According to Pashupati Murarka, president of Federation of Nepalese Chambers of Commerce and Industries, Nepali traders and the general public hold such banknotes worth around Rs 10 billion.