Demonetized Indian Currency Notes Being Circulated in Nepal
Despite India's demonetization move on November 8, 2016, which rendered the ₹500 and ₹1000 notes invalid, these currency notes continue to circulate in Nepal. A syndicate in Nepal is reportedly smuggling these banned notes, with local individuals and security agencies being misled into using them as valid tender. This illegal trade is not limited to local markets but extends to various businesses, with shopkeepers and note holders engaging in this fraudulent practice.
The Nepali government had earlier banned the circulation of ₹500, ₹1000, and ₹2000 notes within its territory. Consequently, the Central Bank of Nepal imposed strict regulations, making it mandatory for financial transactions to exclude these denominations. However, reports indicate that the Nepali syndicate is still actively exchanging demonetized Indian currency for newer notes.
India and Nepal have been engaged in talks to establish a bilateral agreement for addressing this issue, aiming to curb the illegal currency trade. The Indian side has proposed measures to ensure that demonetized notes do not re-enter the market, while the Nepali authorities are working to enforce stricter controls.
Back in 2016, alongside the demonetization in India, Nepal had already prohibited the circulation of the ₹100 notes, which was later lifted, but restrictions on higher denominations persisted. Even though the Indian government had withdrawn these notes from circulation, counterfeit and demonetized notes from across the border found their way into Nepal, creating financial and security challenges.
Authorities in both countries are hopeful that an agreement on the transfer and regulation of currency between India and Nepal will soon be established to prevent such incidents. As per recent information, approximately 68,147 notes of the demonetized ₹500 and ₹1000 denominations are still in circulation in Nepal, affecting economic stability.
The local police have arrested five individuals in possession of demonetized ₹500 and ₹1000 notes worth approximately ₹1.11 crores, highlighting the ongoing issue. The smugglers are exploiting the currency's demand in local markets, causing economic disruptions.
Ranjit Rajendra, SP, Rupandehi (Nepal) stated, "India's demonetized notes were already banned in Nepal in 2016, but despite efforts, counterfeit and banned notes continue to pose challenges. Security agencies are working closely to control and mitigate the impact of this illegal trade."
Efforts are underway to intensify cooperation between the two nations, focusing on border security and stricter enforcement to stop the illegal exchange of banned Indian currency notes in Nepal.