Banks face cash crunch of IC, dollars
KATHMANDU, SEP 17:
The general public has been facing a difficult time in obtaining Indian currency (IC) and the US dollar in cash due to the prolonged foreign currency cash shortage, despite the swollen foreign exchange reserves.
Even large commercial banks have to turn away people that come to exchange Nepali currency with Indian rupees attributing the inadequate reserve of IC and dollars with banks.
Banks are only able to issue travellers’ cheques or pre-paid cards in dollars or IC, instead of providing cash. “We visited five different so-called large banks to exchange a mere IRs 2,000, and finally got the cash after approaching an acquaintance working in one bank,” said an elderly couple travelling to India for medical purpose who wanted some pocket change to pay for taxi fare from the airport to the hotel.
Similar is the case with dollars. The shortage of dollars even prompted Nepal Rastra Bank (NRB) to formally ask travellers to exchange the currency of destination countries instead of dollars, or
use other foreign currency payment instruments issued by banks such as travellers’ cheques, pre-paid cards or credit cards.
Even though the central bank allows a traveller visiting abroad to obtain foreign exchange facility of up to $2500 for each foreign trip against the testimony of a visa and confirmed air-tickets since this fiscal year, travellers will only be provided with $500 cash.
The informal trade between Nepal and India, and between Nepal and China is being attributed for the shortage of IC and dollars in cash form. This fiscal year, Nepal’s foreign reserves grew by 61.5 per cent to Rs 439.46 billion. Nepal also bought IC worth Rs 133.8 billion by selling $ 2.6 million.
Since only 60 per cent of total trade between Nepal and India is undertaken through formal channels, importers grab as much IC as they can even offering higher exchange rate to pay for the remaining 40 per cent illegal trade.
Importers cannot approach banks for Letter of Credit or drafts to pay for under invoiced and smuggled imports, said an official at
the Finance Ministry. In the border towns near India, the exchange
rate for IRs 100 has reached as high as Rs 170 — Rs 10 more than the legal exchange rate.
Likewise, to finance similar informal imports from China, more dollars are being used before it hits the banks. “Informal importers and illegal remitters –– Hundis –– offer more exchange rate to money exchangers so they don’t sell dollars to the banks,” pointed out president of Nepal Bankers’ Association Ashoke Rana. Hundis are suspected of being involved in aiding capital flight from Nepal.
“Moreover, tourists are using more plastic cards instead of exchanging currencies further hitting the supply of dollars in cash,” he added. However, the central bank’s Thapathali office can be the solution for public looking to exchange Nepali currency to dollars or IC.
“NRB’s Thapathali exchange counter will provide the currency exchange facility for the prescribed limit,” said spokesperson of the central bank Bhaskar Mani Gyanwali. “NRB can even provide more on the disclosure of purpose,” Gyanwali added.
Source: THT
