The central bank is going to withdraw Rs 28.22 billion currency notes with former king’s portrait that is in circulation from the market and replace them with the currency notes that has a portrait of Mt Everest.
"Under the central bank's Clean Note Policy, it is withdrawing the old currency notes by mid-March but not demonitising it,” said central bank governor Dr Yubraj Khatiwada.
Besides realising the republican sentiments, the move of central bank will help in bringing the cash – that is presently being hoarded currently – into the banking channel.
“Those people, who are choosing to stack the bundles of cash in their own homes – due to various reasons – to depositing it, will have no choice but come to banks to replace it,” he said, adding that eventually they will need to use those currency notes, which will have limited acceptance after the cut-out date of mid-March.
"Some designated commercial banks’ branches will accept these notes with the portrait of former kings and replace them," he said, adding that the currency will not be demonetised and the intrinsic value of the currency notes will be intact.
Sashin Joshi, president Nepal Bankers' Association (NBA) opined that it might take longer than planned time period to withdraw all the notes with former kings' portraits from the circulation. "The public has to understand that these currency notes are not being demonetised, only taken out of circulation,” he said, adding that the central bank should create awareness among the public to prevent the situation of panic that might arise due to misinterpretation.
The move, though, was politically motivated to completely remove the presence of former sovereign on Nepali currency notes in circulation, may also ease the liquidity crunch, though it’s premature to speculate.
The central bank regularly replaces old currency notes with the new ones as an average age of a note ranges from one year to one and a half year. “After that the security features of the currency notes get compromised so that it becomes difficult to identify whether the note is counterfeit or real," Ashwini Kumar Thakur, chief of Currency Management Department of the central bank, said.
“Though, the central bank has been trying to replace the old currency notes with the new ones this is the right time to phase out the old currency notes as the central bank has enough currency notes in the stock to replace the old ones,” the governor said, adding that the central bank should have started the move long while back but was unable, partly due to negligence and partly due to insufficient stock of fresh currency notes needed for replacement.
Moreover, due to last year's liquidity crunch also those currency notes that had already been recalled had to be again released in the market by the central bank.
currency in circulation: Rs 159.31
Currency notes in circulation with Mt Everest image: Rs 111.96
Currency withdrawn with king's portrait: Rs 18.73 billion
Currency in circulation in market with king's portrait: Rs 28.22 billion