Valley again faces shortage of Indian currency

KATHMANDU:

Getting Indian currency in cash has become a difficult task in the capital as banks are reluctant to provide the foreign exchange in cash, citing short supply.

Indian currency in cash form has always been in shortage here as the central bank supplies a limited quantity to banks in its bid to promote alternative payment instruments. Nepal Rastra Bank (NRB) provides financial institutions IRs 50,000 to IRs 100,000 in cash per week based on their size.

“The amount of cash being provided by the central bank in cash form is insufficient to meet the demand at the banks,” pointed out president of Nepal Bankers’ Association Rajan Singh Bhandary.

“However, for those seeking Indian currency exchange, we provide debit cards to deposit holders or issue them prepaid cash cards,” added Bhandary, who is also the CEO of Citizens Bank International.

However, since Nepal has a cash-centric culture, most of the public want to hold on to hard currency when they go abroad. Moreover, there is a large number of elderly population who visits India for medical purposes or for pilgrimage who are not accustomed to using plastic cards at point-of-sale machines or withdrawing money from Automated Teller Machine (ATM).

“If there is anyone going to India and requires a larger amount of cash they can always get it from NRB’s offices after providing testimonials of the required amount,” pointed out spokesperson for the central bank Bhaskar Mani Gyanwali.

NRB allows debit card and prepaid card holders of Nepali banks to withdraw up to IRs 200,000 a month and IRs 25,000 per transaction. However, the withdrawal limit also depends on the individual bank’s policy. National Payment affiliated banks only allow withdrawal of IRs 5,000 to IRs 50,000 per month. The banks charge more than IRs 150 per withdrawal or payment as transaction fee.

“NRB is supplying less cash knowingly to banks available for exchange to steer the public away from the tendency of travelling with cash to other instruments, especially cards which are more convenient and safe to carry,” Gyanwali said.

“However, they can transfer the money through SWIFT transfer, drafts and other such instruments instead of carrying large amounts of cash,” he said, adding that NRB offices located at eight places across Nepal provide exchange facility of up to IRs 2,000 in cash.

The Indian central bank — Reserve Bank of India — provides IRs six billion in cash annually to NRB.

Though Nepal’s foreign reserve has never been short of Indian currency, cash shortage has always been an issue. By mid-November 2013, Nepal’s foreign reserves stood at Rs 442.3 billion. Nepal also bought Indian currency worth Rs 46.6 billion by selling $860 million.

The large scale informal trade between Nepal and India is attributed for the shortage of Indian currency in cash form.

Since only 60 per cent of the total trade that takes place between Nepal and India is considered to be undertaken through legal channels, importers grab as much cash as possible by offering higher exchange rate to pay for illegal trade.

Source: THT