KATHMANDU: India’s Finance Minister Arun Jaitley has said banknotes demonetised by India and in possession of Nepalis will be exchanged once proper arrangements have been put in place to ensure that black money and counterfeit currency does not enter the Indian financial system.

India had abolished high-value currency notes last November to kill the black money build-up and to arrest corruption.

“The banned currencies will be exchanged, but precaution needs to be taken to ensure that genuine transactions take place” said Jaitley who arrived in Nepal on Thursday to take part in the Investment Summit. Nepal Rastra Bank (NRB) and the Reserve Bank of India (RBI) are already in dialogue. “I’m sure they will come out with a scheme.”

His comments come a few days after two RBI officials visited Kathmandu to take stock of the preparations made by Nepal to provide currency exchange facility to Nepalis holding the banned Indian banknotes.

It is not yet known whether the RBI officials have submitted their report to the Indian Finance Ministry.

“I’ve not seen any report yet. I’ll go back and check it out,” said Jaitley before leaving on Friday. He said that the issue of currency exchange was being handled by the Indian central bank autonomously.

Jaitley added, “Im sure the RBI officials will make proper arrangements with NRB.”

He also met with NRB Governor Chiranjibi Nepal during his short stay in Kathmandu.

Indian authorities have long expressed worry about Nepal being used as a clearing house to channel illegally amassed banned notes into India’s financial system. Because of this concern, the RBI has sought a detailed plan from Nepal on ways to curb inflow of black money from India once the exchange facility is extended to Nepalis here.

The RBI officials asked if Nepali banks could identify Indian nationals having bank accounts here, said Bhisma Raj Dhungana, head of NRBs Foreign Exchange Management Department.

Published in Dawn, March 7th, 2017