by Harish Gupta, National Editor, Lokmat Group
India to accept old notes in Nepal, Bhutan
RBI's new headache
Harish Gupta
New Delhi, Feb 18
The Modi government has finally bowed to the mounting pressure from the Himalayan Kingdom of Nepal and Bhutan and agreed to accept old Indian high value currency notes from these countries.
Highly placed sources in the government say that thorny issue relating to demonetized Re 500 & Re 1000 notes held by the citizens in these two countries hanging fire since November 8 last year, has been resolved.
After a series of high level talks with the two friendly neighbouring countries, the Indian government has agreed in principle to accept deposits in old Indian currency notes. But this facility will be given with a number of riders.
One of the riders is that the amount will be limited in quantity for individuals or a companies and it will be opened for a limited period, these sources say. For instance, the facility for Indian citizens was available between November 8 to December 30. But in Nepal & Bhutan, it will be much less.
India has treaty with Nepal & Bhutan for transactions in Indian currency. According to sources India and Nepal have bilateral treaty under which Nepal buys Indian currency to the tune of Rs 600 crores every year by paying in dollars. The treaty was signed sometime 2001 and the Indian government will have to accept at least Rs 10,000 crores in old currency. Secondly, Indian currency is also in circulation in Nepal as local currency. The same goes for Bhutan too though the Bhutanese government’s amount is limited.
A clue to the thinking was available when the Finance ministry admitted that the governments of Nepal and Bhutan have “shared information with regard to the high currency notes held by their respective National Banks”.
This was for the first time that the government officially said that the two neighbouring countries shared information in old Indian bank notes of Re 500 and Re 1000 denominations.
Minister of State for Finance Arjun Meghwal said that the governments of Nepal and Bhutan have not been able to give any estimate regarding the amount of Specified Bank Notes (SBNs) held by their citizens.
The government of India wanted these two countries to provide estimates of amount held by their Central Banks as on November 8, 2016. But they needed time to collate the information as Indian currency is virtually used as an official currency by their citizens.
It now transpires that government has given a signal to these countries that a formula is being worked out and the old notes will be accepted next month.This will obviously add to the problems of the Reserve Bank of India which is already struggling with astonishing amount of money deposited and unable to come out with the figure. The deposits from NRIs are still being accepted by the RBI who thronging to their branches across the country.
