RBI to make available IRs 1b more for 2013

KATHMANDU, MAR 31 -

At a time when the country is facing acute crunch of Indian currency (IC) notes, the Reserve Bank of India (RBI) has agreed to provide additional IRs 1billion to Nepal for 2013.

Until now, the Indian central bank had been making available IRs 4 billion per year. For this fiscal year, the RBI has already made available IRs 3 billion. The Nepal Rastra Bank (NRB) has been demanding that the RBI make available IRs 6 billion per year, a senior NRB official said.

Besides RBI, other major sources of IC notes for Nepal are Nepali migrant workers and Indian tourists, among others.

Of late, the domestic market is facing an acute shortage IC notes due to factors such as rising trade deficit with India and informal cross-border trade.

Increased cross-border smuggling, capital flight under various modes, including payment for insurance schemes, and increased demand for IC for travel, medical treatment and pilgrimage, have resulted in IC crunch in the domestic market.

Under-invoicing of imported goods is another contributor to IC shortage. Traders say importers pay the actual price of undervalued imports in cash. According to them, they send the remaining payment through hundi after customs clearance in Nepal.

Shortage of IC has also resulted in flourishing black market. The exchange rate has reached up to Rs 170 per IRs 100 in the black market. The NRB-fixed exchange rate is Rs 160 for IRs 100. Black marketers withdraw IC from ATMs in bordering Indian towns and sell them in the black market at high exchange rates.

TO address this situation, NRB had lowered the limit of withdrawal from Indian ATMs to IRs 10,000 a day. Now, the limit has further been lowered to IRSs 5,000 per day following incidents of unauthorised ATM withdrawals by using fake debit cards.

Source: The Kathmandu Post