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Why did Nepal ban all Indian currencies??

New currency notes of Rs 2,000 value

This Nepal government has gone crazy as they have banned. Do know the reason for this extreme step by the Nepal government.

They have said that new currency notes ie Rs 500 and Rs 2000, will only be legal in Nepal, only when the Indian government goves the authorization to the government of Nepal, for the application of the new currencies in Nepal, as well as India.

So the government term is “Foreign Exchange Management Act”, which the =government of India has to authorize in Nepal and the due information to that government so that it can be implemented.

So the Nepal Rastra Bank(NRB) has said that the new currency notes of India, Rs 500 and Rs 2000 are “Unauthorized and illegal”

The new notes were not legal according to onlinekhabar.com. NRB Spokesperson, Mr. Poudel said that the new Indian currencies will only be legal when Indian government issues a notification as per the ‘Foreign Exchange Management Act’

Earlier, before the demonetization rule came into picture, the Nepal government had banned the use of Rs 500 and Rs 1000 notes in Nepal, for any type of trading between both the countries. But many such transactions were happening albeit such steps by the government.

Now that The Indian government had completely ripped off the use of the 500 and 1000 notes, the government of Nepal and the NRB, has made a claim that the new currency notes of India ie Rs 500 and Rs 2000 are illegal and unauthorized unless there is a official notification given by the government of India to the government of Nepal.

The earlier ban on the Indian currency notes (before the demonetization) was lifted by the Nepal government after the visit of Modi to Nepal. Now this statement by NRB strikes a huge cord in the trading relations between both the countries.

The NRB had formed a task force to ease currency exchange facility in Nepal. The money exchanging centres in Nepal presently been stopped doing the normal business of the day. So the people who possess the defunct notes of Rs 500 and Rs 1000 in Nepal, will go through a special easing process.

Issues with India and Nepal presently…

Hundreds of thousands of Nepalese, who earn a living by working as daily-wage labourers in India, visit the neighbouring country seeking medical treatment or rely on Indian markets to purchase daily essentials, are said to be holding big chunk of scrapped Indian bank notes, Kathmandu Post had reported.

Nepal and India are yet to reach an agreement on modalities for the exchange of the withdrawn notes held by Nepalese citizens. Poudel said the two central banks are in close contacts to address this issue but no way out has been found as yet.

The Nepal Rastra Bank has said the country’s financial system holds Rs 500 and Rs 1,000 notes worth Indian Rs 33.6 million. This amount includes cash in bank vaults, financial institutions and the central bank. However, the actual amount is believed to be much higher.

All in all, this demonetization process is a pain for the present and for few dyas from now. But in the lang run, it is an effort in the financial inclusion of the country.

But the flip side is, when I get this John Keynes though in my mind, “In the long run, we are all dead”