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IC crunch beats liquidity crisis
KATHMANDU, MAY 10 -
Heavily dependent on the Indian market for purchasing daily essentials, people along the Nepal-India border are reeling under the shortage of Indian currency (IC).
Reports from various districts bordering India suggest that they are not getting IC even to go for treatment in India. In some towns, money changing companies have shut shop due to the IC shortage.
People are compelled to pay as much as Rs. 170 against IRs 100. Understandably, unscrupulous elements are taking advantage of such a situation by depositing Nepali currency in Nepali banks and going on to withdraw that amount immediately from Indian banks in cold IC cash in order to sell the Indian banknotes at a premium in the Nepali black market.
Bankers also have admitted to such a tendency on the part of some depositors. “Banks have nullified the ATM cards of some customers who are into suspicious withdrawals frequently from ATMs,” said Sashin Joshi, president of Nepal Bankers’ Association (NBA).
Nepal Investment Bank Limited (NIBL) which has one of the highest ATM cardholders’ base, stated it cancelled the ATM cards of many of its customers who were wont to withdraw huge amounts in cash IC frequently right after depositing money in Nepali currency.
“With the stringent measure taken by the bank, the withdrawal of IC cash from Indian ATM counters has come down to Rs. 4 million from around Rs. 30 million just a month ago,” said Prithvi Bahadur Pandey, chief executive officer of NIBL.
Bankers have implemented the policy that they would not permit the withdrawal of more than IRs 25,000 from Indian ATM counters in a single day as per the decision of NBA. Earlier, some banks were allowing withdrawals up to Rs. 100,000 a day.
A banker said that some banks had also issued seven to eight ATM cards for a single account.
After Nepal Rastra Bank (NRB) tightened the screws on IC cash transactions, the market witnessed a shortage of Indian currency especially in the border areas. “NRB took this measure to discourage people’s tendency to deposit money in Indian banks and purchase insurance policies of Indian companies,” said a senior NRB official. “Because of the cash transaction, the risk of capital flight was a distinct possibility.”
This tendency has also been attributed to the rising demand for IC banknotes that triggered the shortage in the market.
NRB has already banned purchasing Indian insurance policy and depositing money in Indian banks. Both NRB and other banks maintained that there was no shortage of IC. “Genuine importers can get the required amount of IC through TT/draft and other document based measures,” said the NRB official. Until April 16, NRB had reserves of IRs 720 million.
People in border districts can’t go to India for medical treatment
Money changing firms have shut shop
People paying NRs. 170 against IRs. 100
Unscrupulous elements depositing NRs in Nepali banks and withdrawing Indian currency from Indian banks
People depositing cash in Indian banks and purchasing insurance policies of Indian companies
NRB bans purchasing Indian insurance policies, depositing money in Indian banks
Posted on: 2010-05-11 07:53
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