India seeks Nepal’s commitment over banned notes

Kathmandu, March 2 (IANS) A two-member team of the Reserve Bank of India (RBI) has sought Nepal's commitment on curbing black money and corruption while exchanging banned Indian currency notes in that country.

In their discussions with the Nepal Rastra Bank (NRB) -- the central bank of Nepal -- and the Nepal Bankers Association -- the umbrella organisation of Nepali banks, the RBI team, while providing the exchange facility for banned Indian notes, expressed concern over measures to check black money and money accumulated through illegal means.

Although the RBI team was positive about providing exchange facility for the demonetised Indian currency notes within banking and financial institutions, it sought Nepal's commitment on identifying and checking black money and money accumulated by the corrupt, according to Nepali officials.

It is believed that banned Indian currency notes worth crores of rupees have been hoarded by the general public, traders and others in Nepal.

According to Bhisma Raj Dhungana, head of NRB's Foreign Exchange Management Department, the Indian team was also concerned about Nepali banks identifying Indian nationals having bank accounts in Nepali banks to negate the possibility of black money.

The possibility of illegal money reaching Nepal is high on account of an open border with India.

The Nepali side responded that their banks had a mandatory provision, which seeks a copy of citizenship from every customer before opening an account in banks and financial institutions (BFI).

"To open bank account in Nepali BFIs, Indian nationals have to provide a copy of their citizenship proof, along with a recommendation letter from the Indian Embassy in Kathmandu," Nepali officials told the RBI team.

According to Dhungana, Indian authorities had expressed apprehensions that Nepal was being used as "clearing house" to channel illegally amassed banned notes back into India's financial system.

During the meeting, the Nepali side also demanded that India allow exchange facility up to INR 25,000 to each Nepali citizen, who have bank accounts -- a provision that was agreed upon by India earlier.

To avoid money amassed illegally like through money laundering and money accumulated through other illegal means, Nepali BFIs have adopted a system like KYC (know your customer) and anti-money laundering provisions.

The RBI team would also visit Bhutan and assess the ground reality there before coming up with exchange modalities for Nepal and Bhutan, they told the Nepali officials.

The Nepali central bank has said that INR 3.6 billion in denominations of Rs 500 and Rs 1,000 is with the BFIs in Nepal, including cash parked in the vaults of BFIs and NRB. But actual stock of banned Indian bills is expected to be much higher, because Nepalis were previously allowed to carry Indian Rs 500/1,000 bank notes worth up to INR 25,000.

Besides, those residing in areas bordering India usually stash Indian notes of larger denomination as they have to visit Indian markets frequently to buy goods.

The Indian government's November 8 demonetisation move has caused inconvenience to many Nepalis, especially those who earn a living by working as daily-wage labourers in India, visit India for medical treatment, study, pilgrimage, trading and others.

(This story has not been edited by Social News XYZ staff and is auto-generated from a syndicated feed.)