Post-demonetisation of high-value currency notes in India, Nepal Premier Pushpa Kamal Dahal ‘Prachanda’ rang up Prime Minister Narendra Modi seeking an arrangement whereby Nepal residents holding a huge stock of the now-banned high denomination Indian rupee notes could swap them for legal tender.
Local media in Nepal, too, had a field day following the Prachanda-Modi telephonic conversation earlier this week, alleging that the Maoist leader had more than Rs 1 billion in Indian currency sequestered with trusted aides in India — and was worried about the loss that he stood to suffer.
Named among the Nepali political bigwigs in the same soup were other senior Maoist leaders who, too, have allegedly amassed crores of rupees since they gave up their 10-year-long armed insurgency in 2006.
Indian currency is legal tender in Nepal, with which India shares an 1,850-km-long open border. Indian money is freely accepted in commercial transactions that take place in the Himalayan nation.
However, as per Reserve Bank of India guidelines, no Indian currency note higher than Rs 100 may be taken out of the country — and this restriction is scrupulously implemented by the Indian customs authorities.
Moreover, as per another RBI stricture (dated June 19, 2014) and implemented by the Indian Customs authorities, no person may take outside India — or bring back into the country — an amount exceeding Rs 25,000.
The Nepali central bank, the Nepal Rastra Bank (NRB), has since Wednesday stopped all transactions and exchange of Indian currency notes of Rs 500 and Rs 1,000 denominations — which it was doing illegally in view of the RBI guidelines on Indian currency export.
According to NRB estimates, Indian high-denomination currency of the order of Rs 3.36 crore is in the financial system in Nepal.
Interestingly, similar demands for facilitation in exchange of Indian high-value notes has come from Non-Resident Indians in several countries who have suggested that bank note-exchange counters be set up in the Indian missions there.
A large number of NRIs in the United Kingdom urged Prime Minister Modi to allow note exchange abroad also so that they were not inconvenienced. The Indian High Commission in London, so far, has received no instructions in this regard.
In China, too, where a large number of Indian businessmen reside for long periods to carry out trading activity, appealed to the Indian Embassy in Beijing to allow note exchange — but the embassy officials reportedly asked them to do so on their return to the country.
Significantly, what has come in prominence — though known among financial circles even earlier — is that huge amounts of Indian currency, especially in high-value notes, is sequestered abroad and there are people who want to now exchange the phased out notes for the new ones.
Prachanda has knocked Modi’s doors seeking help for millions of Nepalis who have been put into financial difficulties by the Indian government measure. The question is: will Modi help? And can he under the existing RBI rules?