Why the new notes of India banned in Nepal?

Nepal has banned the use of Indian currency notes of Rs. 200 and higher with immediate effect. The following points may give us an insight into why it has taken this step and when it might lift the restrictions.

  • Nepal and Bhutan are having about Rs. 950 crores worth of demonetized Indian currency
  • India has so far not accepted the request from Nepal to exchange these scrapped currency notes with the newly issued notes
  • India says that there is no formal agreement regarding the use of Indian currency in Nepal and Bhutan so there is no provision for replacement of the demonetized currency notes.
  • The Indian government suspects that a considerable part, if not most of this money may actually belong to Indian residents in the states bordering Nepal like Bihar and UP.
  • Exchanging this currency might give an opportunity to Indians who are still holding a huge amount of demonetized Indian currency
  • It is possible that India will exchange the notes after the general elections in 2019 are over
  • Nepal says that since it has not yet legalized the use of the new currency notes issued after demonetization, that is the new denominations of 200, 500 and 2,000, it has imposed the ban on them. This ban may be lifted after India exchanges the notes lying with the Nepalese and Bhutanese central banks.

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