Banks facing short supply of dollar

KATHMANDU, AUG 30 -

While the central bank’s statistics show a record-high foreign exchange reserve, people are finding it hard to get US dollar in cash form from commercial banks.

The Nepal Rastra Bank (NRB) and commercial banks have admitted that there has been shortage of US dollar in cash form for the past few weeks.

The central bank has told the banks to discourage making payment in cash form. “We have asked them not to provide more than $500 for a person traveling abroad in cash form,” said a senior NRB official. 

In its notice issued on Wednesday, the central bank requested to get foreign exchange in other forms such as traveler’s cheques and foreign exchange bearing pre-paid cards and credit cards beyond certain limit.

 The NRB has also asked the people traveling abroad to get foreign currency of the same country where they are traveling.

The official said that the NRB has told the banks to maintain adequate traveler’s cheques. “We also have other foreign currencies such as euro to provide to the people traveling abroad,” said the central bank official.

The central bank said that it would be less risky if travelers use cash for miscellaneous spending and other instruments for bigger payments instead of using cash to make all kinds of payment. “The banks have adequate alternative instruments,” states the NRB statement.

Bankers said that there has been shortage of US dollar in cash since the last one month. “The availability of cash has declined by 50 percent in the recent days,” said a banker.

Both central bank and bankers said that tourists abandoned bringing foreign currency in cash form, resulting in shortage of cash. However, a banker pointed to the payment for the goods that were imported by under invoicing at the customs office and increased capital flight as other factors leading to the present problem.

The shortage looks to have connection with a flexible policy on foreign exchange adopted by monetary policy for FY 2012-13.

As per the new monetary policy, a person can get up to $ 2500 at a time as passport facility irrespective of frequency of travel abroad. Earlier, the facility was limited to two times a year. It has also provisioned that those going for trade promotion and conferences can get up to $ 5000 at a time.

Another central bank official also said that the fact that wider use of dollar to make payments for imports from Khasa, Tibet has also contributed to the shortage of greenback. 

Khasa-based traders do transactions in Nepali currency which they latter bring to exchange bureaus in Kathmandu and take away US dollar, according to the NRB official.

The shortage of dollar is, however, expected to encourage people to opt for other instruments for traveling abroad.

“As there are a lot of alternatives, we should not get panicked about shortage of cash,” said another banker. Although the shortage of US dollar in cash form appeared lately, the country has been witnessing a shortage of Indian currency note for a while now. As a result, the IC notes are exchanged at rates as high as Rs 170 as against NRB’s fixed rate of Rs 160.15p for IRs 100 in the bordering towns with India.

Source: The Kathmandu Post