NRB attempts to curb illegal trade of Indian Rupee in Nepal
To stop illegal trade in Indian currency, Nepal's central bank has introduced limits on withdrawal of Indian rupees from automated teller machines in India using cards issued by banks in Nepal.Updated: Jun 22, 2010 13:13 IST
To stop illegal trade in Indian currency, Nepal's central bank has introduced limits on withdrawal of Indian rupees from automated teller machines in India using cards issued by banks in Nepal.
The move follows a sharp increase in withdrawal of Indian currency (IC) from ATMs in India—especially those located close to the border--by individuals using electronic cards of Nepali banks.
There is a huge demand for IC in Nepal and failure of banks to cater to it is stated to have led to this rise. Indian rupee is the legal tender in Nepal and has a fixed exchange rate of Rs 100 to NRs 160.
"Hundreds of individuals deposit huge sums of Nepali rupees in Nepali banks and withdraw it from banks across the border to sell them at higher rates in Nepal," the Republica daily quoted a senior NRB official.
As per the new rules, such withdrawals have been limited to Rs. 200,000 per month. Earlier, account holders could withdraw Rs 25,000 daily from banks in India using their ATM cards.
Due to the demand, people sell IC at rates much higher than those fixed by NRB. The recent directives issued on Friday aim to reduce such illegal trade and ensure adequate supply of IC to those in genuine need.
Banks have been asked to cancel ATM cards of persons found indulging in suspicious withdrawals from Indian banks.
The new rules stipulate that students and importers would get additional IC facilities from banks on providing valid documents.
In December last year, NRB issued strict guidelines to money changers in Nepal asking them to maintain records of all individuals seeking IC and to report any large or suspicious transactions.
"These formalities and paper work has led many to procure IC using illegal means or at higher rates," said a money changer in Kathmandu.
According to the Republica, NRB has IC reserve of Rs 20 billion at present and spent US $ 1.6 billion to procure Indian rupees to cater to the deficit due to decreasing exports and increased imports from India.