A visiting team of officials from the Reserve Bank of India has sought commitments from Nepal on tackling black money and corruption during discussions on exchanging scrapped Indian currency notes held by Nepalese citizens.
During talks with the Nepal Rastra Bank and Nepal Bankers Association, the two-member RBI team expressed concern about black money and money accumulated through corruption that could be laundered during the exchange of the banned notes.
Though the Indian officials were positive on the issue of providing exchange facilities to Nepal’s banking and financial institutions, they sought commitments on identifying and checking black money, Nepalese officials said.
Experts have estimated that banned Indian currency notes worth billions have been hoarded by the public and traders in Nepal.
According to Bhisma Raj Dhungana, head of NRB’s foreign exchange management department, the Indian team also expressed concern on the issue of Nepal’s banks identifying Indian nationals who have bank accounts in the country to stash away black money.
The chances of this happening are high as the two countries have an open border and illegal money could easily be sent from India to Nepal, the Indian team said.
The Nepalese side responded that the country’s banks have mandatory provisions for seeking a copy of citizenship from every person who wants to open bank accounts. To open account in Nepali BFIs, Indians have to prove their citizenship and provide a recommendation letter from the Indian embassy in Kathmandu, the Nepalese officials told the RBI team.
During the meeting, the Nepalese side said India should allow Nepalese citizens to exchange up to Indian Rs 25,000 .
The RBI team will also visit Bhutan and assess ground realities there before framing modalities for exchanging the banned notes.
Nepal’s central bank has said banned Rs 500 and Rs 1,000 notes worth a total of Rs 3.6 billion is held by the country’s BFIs, including cash parked in vaults. However, the actual stock of banned Indian bills is expected to be much higher because Nepalese citizens were earlier allowed to hold Rs 500 and Rs 1,000 notes worth up to Rs 25,000.
People living in areas bordering India also usually stash Indian notes of larger denominations as they visit Indian markets frequently to buy goods.
The Indian government’s decision to demonetise the high value notes last November caused inconvenience to many Nepalese, especially those who earn a living as daily wage labourers in India or visit the neighbouring country for medical treatment, studies and trade.