Nepal declares new Indian notes of Rs 500, 2,000 ‘illegal’ for now

Photo of Nepal Rasta Bank building in Kathmandu.

Kathmandu: Nepal’s central bank today said that while there is no clarity on the fate of the withdrawn Indian currency notes of Rs 500 and Rs 1,000 denominations in Nepal, new Indian Rs 500 and Rs 2,000 bank notes are deemed illegal and banned for exchange.

According to the Nepal Rastra Bank official statement the new Indian notes, cannot be exchanged until India accords approval, the new currency notes which have appeared in border areas dues to the open border.

Chief of the NRB’s eastern region, Ramu Poudel, told members of business community in Biratnagar that the new Indian rupee notes in Nepal will be considered as “illegal” until new facilities of exchange are determined by the Indian apex bank.

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Poudel said, as of now, the understanding with Reserve Bank of India is that a Nepali citizen can hold up to Rs 25,000 worth of old Rs 500 and Rs 1,000 denomination Indian currency notes. “Even the fate of those old notes is uncertain… how can these new Indian notes coming into the market be considered as legal?”

NRB said, Nepal along with its neighbor India have not reached any agreement on the modality of exchange of the withdrawn notes, and the new notes will be exchangeable in Nepal only after India’s central bank issues a new FEMA notification under the Foreign Exchange Management Act.

The FEMA notification allows foreign countries or nationals to hold on to a certain amount of Indian notes. At present, India has allowed Nepali citizens to individually hold Rs 25,000 in Indian currency.

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After India banned its old Rs 500 and 1,000 notes, Nepal’s central bank had formed a task force to prepare a guideline for Indian currency exchange.