Nearly one year after the demonetization of high-value notes, India's neighbours in the Himalayan region Nepal and Bhutan are still grappling to find a window to exchange old notes. Since Indian currency is a legal tender in both the countries, they are sitting on a huge cache, yet to find a way back to the Reserve Bank of India's lockers.

Talking to a select group of reporters at the Foreign Correspondents Club here, Nepal ambassador Deep Kumar Upadhyaya admitted that despite raising the issue at the highest-level and several rounds of discussions, the issue has eluded a solution. Upadhyaya said that while people living in the border areas had succeeded in exchanging old notes, the poor mostly living in far-off mountains were hit hard.

According to figures released recently, a total of Rs 15.28 lakh crore (Rs 8.58 lakh crore in Rs 500 and Rs 6.86 lakh crore in Rs 1,000 denominations) out Rs 15.44 lakh crore returned to the RBI, leaving only Rs 16,000 crore under speculation. Many believe that huge chunks of this unreturned money is lying in Nepal and Bhutan.

Diplomatic sources here said that since Nepal, right now, is undergoing through different stages of elections, many political parties and leaders are using demonetization as a tool to raise anti-India feelings. There are 32,000 Nepali Gorkha soldiers in addition to 90,000 pensioners enrolled in Indian Army, besides 60 lakh Nepali citizens working across India, sending Rs 3,840 crore remittances annually to their country.

Sources here said the negotiations between Nepal and India have been stagnant as the RBI is not willing to exchange more than Rs 4,500 per person. Nepal has been insisting to raise this amount to Rs 25,000 for each account. Confirming that there were differences, the envoy said his country must be provided with a mechanism.

Upadhyay explained that nearly every family residing in the hilly regions of Nepal has a member employed in some part of India. "There are pensioners, also almost every family has a member in India. During festive seasons, when they return they take money for various needs such as medical... It is our moral obligation. Nepal must get some kind of a window," he said.

Also, Nepalese citizens working in India send remittances to their families in Nepal in higher denomination notes. Nepal, a landlocked country, depends on India for trade and supplies.

According to a rough estimate, banned notes worth as much as Rs 3,302 crore are locked in Nepal and Bhutan. But the Ambassador said he cannot confirm to the exact amount as unlike Bhutan, the Nepal Rashtra Bank (NRB) had not called for depositing scrapped money. "The money is lying with individuals, so there are no estimates with our government," he said. Diplomats here believe that an indifference towards attended demonatisation issues of neighbours would hit hard ties with these countries in future.

The RBI had set up a task force headed by the finance ministry and including an official from the external affairs ministry, to find solutions to questions arising from demonetization that had an extra-territorial component. The government sources here say the cautious approach by the RBI owes its concern about the availability of fake Indian currency and possibility of 'black money' travelling from India into Nepal.

Anti-india feel

Diplomatic sources here said that since Nepal, right now, is undergoing through different stages of elections, many political parties and leaders are using demonetisation as a tool to raise anti-India feelings