......... there are reports that RBI has issued a circular to its banks to start trade transaction with Nepal in USD. (Previously, Nepal and Bhutan had been trading with India in INR.) The circular that only concerns Nepal clearly implies that India seeks to minimize frauds related to INR transactions in Nepal. But this will have an adverse effect on two-way trade in border areas. This RBI inquiry could be one of the strategies of the Indian government to put pressure on Nepali government to change the peg. As an import-dependent land-locked country, Nepal has always been dependent on India, politically, economically and culturally. This could be one of India’s strategies to maintain Nepal’s monetary dependency on the southern neighbor. As Indian businesses in Nepal will not immediately benefit by a change in the peg, the latest move seems to have been taken with a long-term vision..............
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