Demand for Indian currency falls

KATHMANDU:

Nepal, which used to see a shortage of Indian rupee most of the time, has seen its demand dip in recent days, as Nepalis working in the neighbouring country came back home during election replete with Indian currency and sealed borders prevented the flow of Indian rupee from the country.

Nepal Rastra Bank (NRB), the central monetary authority, said demand for Indian rupee has dropped by 20 per cent to 30 per cent in recent days as supply of the currency went up.

NRB currently sells Indian currency through eight of its offices located all around the country, including Kathmandu.

“Each of these offices outside Kathmandu Valley earlier used to sell IRs 700,000 to IRs one million every day,” chief of the research department at NRB Dr Min Bahadur Shrestha told The Himalayan Times. “Now, even offices like those in Biratnagar, which used to sell up to IRs one million every day, are seeing demand for only around IRs 800,000 per day. In some places, the demand has dipped to IRs 700,000 per day.”

One of the reasons for the rise in the supply of Indian currency is cash brought in by Nepalis working in India during the recent Constituent Assembly election, according to Shrestha. “Also, borders that remained sealed during elections reduced the number of people visiting bordering Indian areas for trading purpose, which prevented the flow of Indian currency to the neighbouring country.”

Traders, on the other hand, also suspect rise in illegal trading activities in bordering areas, such as smuggling of gold or betel nuts to India, due to the concentration of security forces in other parts of the country during the election. This, they say, increased the flow of Indian currency via informal channels to Nepal.

“Also, relatives of poll candidates may have received cash from their near and dear ones in India, which pushed up the supply of Indian currency,” the traders said.

As a result, many money exchange counters located in bordering areas of the country

are seeing clients dump the Indian currency — a trend which is rare and many say ‘will not last long’.

The demand for Indian currency is usually high in Nepal as 65 per cent of the country’s imports are made from India. At the same time informal trading with India is also high and usually skewed in favour of the southern neighbour, which raises demand for Indian rupee.

To reduce informal trading, NRB recently introduced measures like cap on withdrawal of Indian currency in India using ATM, debit or credit cards issued by banks based in Nepal. As a result many were paying a premium while purchasing Indian currency.

Source: THT