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?
- 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.
- 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.
- 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.
- 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?
- Loss in trade- The ban is expected to affect the billions of rupees worth trade between the two countries.
- Benefit to China-
- It is seen as a friendly overture extended by Nepal to its next door neighbour China by some Indian diplomats.
- This could help China set a firm foot in the land-locked country.
- Loss to tourism sector-
- 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.
- It also comes at a time when the Nepal government is preparing to celebrate 2020 as the ‘Visit Nepal Year’.
- About 2 million people are expected to visit Nepal in 2020, a bulk of them from India.
Source
DNA