IC supply may go up with India's decision to recall currencies

KATHMANDU:

The supply of Indian currency is likely to go up in the domestic market in the coming

days, as India’s latest decision to recall all banknotes issued before 2005 is expected to propel Nepalis hoarding Indian rupees to offload them.

The Reserve Bank of India (RBI), today, said it will completely withdraw all banknotes issued prior to 2005, beginning April 1.

This means the public will be required to go to banks to exchange old notes from the first day of April. Also, non-banking customers wishing to exchange over 10 units of Indian currencies of IRs 500 and IRs 1,000 denominations will have to provide proof of identity and residence prior to exchanging them, says a statement issued by the RBI today.

This measure will come into effect on July 1.

The RBI has said the public can easily identify banknotes issued before 2005 as they do not have the year printed on the reverse side of the note. It has also said ‘Indian banks will provide exchange facility for those notes until further communication’.

The Indian central bank’s latest move is aimed at flushing out counterfeit notes from the market, as notes issued after 2005 have added security features that make counterfeiting difficult, The Hindu said.

“With the introduction of this measure, Nepalis hoarding Indian currencies issued before 2005 will be compelled to liquidate them. This will increase circulation of Indian rupee for a while in the domestic market,” head of the Research Department at Nepal Rastra Bank (NRB) Dr Min Bahadur Shrestha told The Himalayan Times.

Although it is not known how many units of Indian banknotes issued before 2005 are in circulation in the domestic market, NRB has clarified it does not have stock of such notes.

“We always send fresh Indian notes provided to us by RBI to the market,” Dr Shrestha informed.

Currently, Reserve Bank of India allows Nepal to import up to IRs five billion of physical currency every year. These notes are brought into the country in installments of around IRs 600 million through land routes. “This is why we always maintain a stock of fresh notes,” Dr Shrestha said.

Indian currency is quite popular here, as India is Nepal’s biggest trading partner, with the southern neighbour contributing to almost two-thirds of the country’s foreign trade. Because of this, many living in towns adjoining the Indian border keep stock of Indian rupees.

Source: THT