In the first five months of the current fiscal year, Nepali ATM users have withdrawn 19.2 billion Indian Rupees in India. Only IRs 3.46 billion was withdrawn last year.
Compared to the first five months of last year, ATM withdrawals have gone up by 448 per cent. This has been largely attributed to traders who have been using ATMs in India to withdraw Indian currency for illegal transactions. Legal traders can withdraw Indian currency from Nepal Rastra Bank here if they furnish details of their past transactions, so illegal traders resort to ATMs across the border.
Such traders make deposits in Nepali banks first, then withdraw Indian currency through ATMs in India. According to a study by Nepal Rastra Bank, 82 per cent of withdrawals are done through SBI Bank, Kumari Bank, Nepal Investment Bank and Everest Bank. Meanwhile, the use of bank drafts to obtain Indian currency has decreased by 42 per cent.
Although Nepal Rastra Bank makes Indian currency available to the Nepali market, the difficulties in withdrawing it from local banks has resulted in a black market. While Nepal Rastra Bank has a fixed selling price of Rs 160 for IRs 100, the black market offers Rs 165.
Radhesh Pant, former president of the Nepal Bankers Association, says, "Even the banks are not getting enough Indian currency. To maintain the normal flow of Indian currency we should first crack down on black marketeers." Last year, Nepal Rastra Bank exchanged US$2.19 billion for Indian currency.