Nepal ban on INR

Why is it in news?
  • Government of Nepal banned the use of high denomination Indian currency notes, namely that of Rs 200, Rs 500, and Rs 2000.
  • The decision was taken in a cabinet meeting, following which a notice was issued asking the Nepalese citizens not to keep or transact in these banknotes.
In Detail
  • The Nepal government’s decision to ban all new Indian currency notes above Rs 100 is threatening to set stress in the relations between the two countries.
  • Why Nepal took such decision?
    1. The cabinet decision comes in the wake of the Indian government sitting on a request to exchange old currency notes worth Rs 950 crore (which were rendered obsolete after demonetisation) that still remains with Nepal citizens.
    2. Nepal has been insisting that the exchange facility ceiling of Rs 4,500 per person should be increased to Rs 25,000 per person; however, India has not agreed to it yet.
    3. When the Indian government introduced the new denominations following demonetisation in 2016, the Nepal government did not make any announcement on the status of the new currency notes.
    4. As a result, new currency notes of Rs 2000, 500 and 2000 denominations were being used freely in Nepal over the past two years.
  • What will be the repercussions of the decision?
    1. Loss in trade- The ban is expected to affect the billions of rupees worth trade between the two countries.
    2. Benefit to China-
      1. It is seen as a friendly overture extended by Nepal to its next door neighbour China by some Indian diplomats.
      2. This could help China set a firm foot in the land-locked country.
    3. Loss to tourism sector-
      1. The decision, besides putting lakhs of Nepalese working in India in a fix, would also affect middle and low-income Indian tourists, who frequent Nepal.
      2. It also comes at a time when the Nepal government is preparing to celebrate 2020 as the ‘Visit Nepal Year’.
      3. About 2 million people are expected to visit Nepal in 2020, a bulk of them from India.
Source
DNA




Posted by Jawwad Kazi on 15th Dec 2018