Nepal ban on Indian currency notes raises fear of a more feisty dragon

In a move that may severely impact diplomatic ties, tourism and trade, the Government of Nepal banned the use of high denomination Indian currency notes, namely of Rs 200, Rs 500, and Rs 2000.

The decision was taken in a cabinet meeting on Monday, following which a notice was issued asking the Nepalese citizens not to keep or transact in these banknotes.

The Nepal government's decision to ban all new Indian currency notes above Rs 100 is threatening to set in a frigid winter in the relations between the two countries.

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 demonetization) 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 demonetization 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.

The ban is expected to affect the billions of rupees worth trade between the two countries and is being read by Indian diplomats as a friendly overture extended by Nepal to its next door neighbour China. This could help the dragon set a firm foot in the land-locked country.

However, 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.

The Prime Minister KP Oli-led government has already made its intentions clear of having more than friendly relations with China, which is cause of worry for the Indian government.

MORE THAN FRIENDS

In Nepal, the Prime Minister KP Oli-led government has already made its intentions clear of having more than friendly relations with China, which is cause of worry for the Indian government.