NEW DELHI: An MEA-finance ministry joint committee will issue instructions this week to ease demonetisation pains in Nepal, Bhutan, among Indian expatriates in different countries, and foreign diplomats stationed in India.
The group was set up after Nepal Prime Minister Prachanda called Narendra Modi last week to ask for a solution to the fact that Nepal is sitting on crores of old Indian currency notes. Led by an additional secretary in the finance ministry, A Tyagi and joint secretary (north) in MEA, Sudhakar Dalela, the group has already met several times and scheduled to meet again on Tuesday.
Nepal and Bhutan, where Indian currency is legal tender, are likely to be asked to hold the deposits following due process, which will include know-your-customer (KYC) compliance and proper paperwork on identity of holder of the currency notes. These will then be exchanged by the Indian government. For many years the Nepal government had outlawed the use of Rs 500 and Rs 1000 currency notes. Ironically, these were readmitted as legal tender in Nepal, when Modi visited in 2014.
There are over 5 million Nepalis who work in India and remit money back home. There are others who are engaged in cross-border trade across the open border, and still others who come to India for medical treatment or education and many who use Indian currency to buy essentials for daily living, particularly true in the border regions. They have been hit hard with the demonetisation drive.
However, Nepal is also a known conduit for fake Indian currency, so the government body is expected to call for vetting of the currency notes in Nepal before the holders are compensated. This could delay the compensation process, as well as add to the pain of many in Nepal who may have been transmitting fake notes, perhaps unknowingly.
Border trade in countries around India – Bangladesh, Myanmar, Nepal and Bhutan are taking a hit, according to sources, due to the currency crunch. In Bangladesh, while the Indian rupee is not legal tender, many traders, businessmen and transporters have been using Indian currency for their cash transactions, which are now rendered illegal. Bangladesh used to be a huge transit point for FICN as well, but in the past few years, the Sheikh Hasina government have cracked down on the ISI-sponsored network, rolling up many of their operations.
However, money exchange traders in Kabul have reportedly said they were holding about Rs 60 crore in Indian currency notes! Since Kabul is a big transit centre for Indian notes from Pakistan, these currency traders may not get satisfaction, unless the notes are proved to be genuine. MEA spokesperson Vikas Swarup said last week, money exchange associations in places like Dubai, Singapore and Hongkong have also asked how they would dispose of old Indian currency notes. Since the rupee is not yet a convertible currency, the government will have to find a way to not let them down in a way that diminishes faith in the credibility of the Indian currency.
New problems have crept in with Indian expatriates in different countries asking government how they could exchange old notes for new. In some countries where Indian banks have branches the solution might be easier, but it will test the government’s ingenuity in the countries that don’t.