"Nepal lifts decade-old curbs on higher-denomination Indian currency notes"
Nepal Rastra Bank (NRB)
Nepal's central bank, responsible for monetary policy and currency regulation
Treaty of Peace and Friendship, 1950
India-Nepal bilateral treaty establishing open border and reciprocal citizen rights
India and Nepal share one of the world's most unique bilateral relationships, anchored by the Treaty of Peace and Friendship, 1950, which grants citizens of both countries reciprocal rights to reside, own property, and engage in trade across the open border. This open-border arrangement — stretching over 1,800 km — means that Indian currency circulates extensively within Nepal, making monetary policy decisions in India directly consequential for Nepal's economy. Nepal's central bank, the Nepal Rastra Bank (NRB), pegs the Nepalese Rupee to the Indian Rupee at a fixed rate of 1 Indian Rupee = 1.6 Nepalese Rupees, making the Indian Rupee a quasi-legal tender in cross-border transactions.
When India announced demonetisation of ₹500 and ₹1,000 notes on November 8, 2016, the immediate effect rippled across the border. Nepal, which had no mechanism to exchange the suddenly-invalid notes through its banking system, found itself holding large quantities of demonetised Indian currency. The NRB responded by prohibiting the entry and use of Indian currency notes above the ₹100 denomination, while retaining the existing ceiling of ₹25,000 on the total amount of Indian currency that travellers could carry. This restriction, though a pragmatic emergency measure, persisted for nearly a decade, creating friction for tourists, traders, and the large Nepalese diaspora working in India.
The India-Nepal monetary relationship is structurally asymmetric: India's monetary policy decisions — interest rates, currency redesigns, demonetisation — have immediate pass-through effects on Nepal's economy, yet Nepal has no formal seat at the table when these decisions are made. The NRB manages this dependency through regulatory notices and gazette notifications that align Nepal's currency rules with India's evolving monetary landscape. The fixed exchange rate peg means Nepal cannot independently adjust its currency's value against the Indian Rupee, making regulatory harmonisation the primary tool of monetary management.
The ₹200 denomination was introduced by the Reserve Bank of India after the 2016 demonetisation to fill the gap between ₹100 and ₹500 notes. …
Convertibility of rupee implies
Which one of the following is not the most likely measure the Government/Reserve Bank of India takes to stop the slide of Indian rupee?
Following India's 2016 demonetisation, Nepal imposed restrictions on Indian currency. Which of the following correctly describes the regulatory position in Nepal BEFORE the 2026 revision by the Nepal Rastra Bank?
With reference to the revised Nepal Rastra Bank regulations on Indian currency (2026), consider the following statements:
1.Nepalese nationals may carry Indian currency from Nepal to any country, not just India.
2.Indian and Nepalese nationals may carry redesigned ₹500 notes issued on or after November 9, 2016, into Nepal.
3.The per-person ceiling on Indian currency carried into or out of Nepal has been increased from ₹25,000 to ₹50,000.
4.Foreign currency up to $5,000 equivalent may be brought into Nepal without a customs declaration.
Which of the statements given above is/are correct?
Which of the following best explains why India's 2016 demonetisation had an immediate and significant economic impact on Nepal, even though Nepal is a sovereign country with its own currency?
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