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Currencies
NEPALESE RUPEE
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Nepalese rupee | Weekly trend of Nepalese rupee
Introduction


Rupee is a currency unit that is used as a medium of exchange mostly in the counties in Asian continent. A Sanskrit word “rupyakam” that means silver coins is said to have been the source of origin of the word rupee. In the country Nepal, rupee is known as Nepalese rupee and forms the national currency unit. The currency is commonly abbreviated with “Rs” or “” signs and is subdivided by the unit “paisa” also called “pice”. Rupee had been the official currency of Nepal since 1932 when it replaced “silver mohur” and maintains a fixed peg to the Indian currency, Indian rupee @ 1 INR = 1.6 Nepalese rupees. The International Organization for Standardization assigns currency codes and numeric codes for each and every currency of the world and the Nepalese rupee has been designated with these codes as NPR and 524 respectively.

Overview


Nepal is very much an agrarian economy that still has to go a long way to be called as a developed nation. There are several reasons for Nepal to be counted among the poor countries of the world, few of them being its lanlocked location and vast mountainous terrain that make the development of infrastructure difficult and expensive, lack of technological advancement and long in existence civil war that pulls the growth of the economy backwards. The country has been receiving foreign aids in large amounts and that is helping the country to function. Though, in the recent years, the trade balance of Nepal has somewhat improved due to a better export performance and strengthening tourism sector. The country has higher international money reserves than before and looks in a better condition inspite of the hinderances in the way of economic growth but the future is still uncertain under the increasing foreign debt.

Nepalese rupee is pegged to the Indian rupee since it had been incepted. Its value hovers around the exchange rate 1 Indian rupee = 1.6 Nepalese rupee. There has been no signs yet to float the Nepalese currency in the world market and discontinue the peg made to the Indian rupee. The restrictions regarding the import and export of local currency suggest that the local currency can only be imported by Indian or Nepalese nationals and can only be exported by the Indian nationals travelling to India. there is no restriction on the import of foreign provided all the amounts exceeding US$ 2000 must be declared. The export of foreign currency can only be done up till the amount imported.

Structure


The Nepalese currency, rupee, is subdivided into 100 equal paisa. Paper currency that is issued in 9 denominations, dominates the structure of currency in Nepal as the coins are minted in just 6 denominations. The face values of banknotes include Re 1 (not produced but still in circulation), Rs2, Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1000. The banknotes in Nepal do play an important part in promoting the culture of the country, as they possess images that show beautiful landscapes, unique animals found in the country, temples and portrait of the ruling king. Also, a vital link of culture and currency notes is displayed during the Dashain festival in Nepal when it is customary to give away new unused banknotes and not the older versions of them. The text written on the front side of the banknotes engage the use of “Devnagari” script and on the reverse side, English is also used along with Devnagari. Color schemes of various notes differ from each other with 1 predominated color in each scheme. The portrait picture of the ruling king wearing the royal crown is depicted on the left of the obverse side of banknotes. The details of other images on different notes are mentioned below

  • Re 1 – This note is dominated by purple color and has a picture of a temple in the center of the front side and features two musk deer on the backside

  • Rs 2 – This note again highlights a temple on the center of front side and a leopard is depicted on the backside. Green color predominates the color scheme.

  • Rs 5 – the note appears red in color and has a picture of a temple in the center of front side along with the image of the ruling king besides it. The reverse side shows two yaks and steep Himalayan Mountains in the background

  • Rs 10 – The color scheme of the note is influenced with blue and orange colors and the front side has a Buddhist image in its center. Backside possesses an image showing two gazelles.

  • Rs 20 – The picture of a temple in the middle of obverse side is identified as Krishna Mandir and the note has an orange color scheme. The reverse side features a picture of an elk.

  • Rs 50 – The backside of this note highlights a ram in the mountains and on the obverse side, the Royal Palace is shown at the center. Blue is the predominant color.

  • Rs 100 – Image of Nyatapola temple and Mt. Everest on the front along with the portrait of the ruling king and the backside has a picture of a rhinoceros. Green color forms the predominant color.

  • Rs 500 – With brown as its main color, the center of the obverse side of banknote highlights a view Ama Dablam, a mountain in Nepal and reverse side has an image featuring tigers.

  • Rs 1000 – The 1000 denomination note is gray in color and possesses an image of Swayambu stupa on the obverse side. The backside shows a picture of an elephant.

The coinage of Nepalese rupee is issued in denominations 25 and 50 paisa, Rs 1, Rs 2, Rs 5 and Rs 10. The coins are less common in circulation and most of the transactions are made using banknotes only. The coins are minted with the text on them written in “Devnagari” script and unlike the banknotes, the coins do not involve use of any other language. The coins have their face values embossed on their obverse sides in “Devnagari” numerals along with engraved image of important temples in Nepal. Nepalese rupee is administered and controlled by the central bank of the country, Nepal Rastra Bank that has been serving since 1956. The bank monitors the flow of currency in country and supervises the monetary policy and is also one of the chief owners of the Nepal Stock Exchange.

History


The land of Nepal remained deprived of its own currency untill as late as the 6th century when the first ever coins in Nepal got minted using copper courtesy the Licchavi kingdom that had Indian religious designs on them. Prior to that, coins issued by Indian kingdoms such as Maurayas, Guptas etc were in circulation in Nepal. With the change of kingdoms ruling over Nepal, different coins were minted infrequently till the 15th century when Nepal got divided into three powerful states named Kathmandu, Patan and Bhatgaon, after a short lived unified rule. The three kingdoms started minting silver coins called silver tankas in large quantities and the coins were differentiated according to their designs, Patan coins bore a star, Kathmandu coins had wavy lines and Bhatgaon coins had a triangle. The quantity in which the silver coins were minted was large enough that enabled nepal to export these coins to Tibet. Also, gold mohurs were issued for transactions and even one of the the smallest gold coins ever used in the histrory of currencies got minted in Nepal weighing just 0.002 grams.

The three kingdoms were unified to form the Kingdom of Nepal with the help of the efforts of Gorkha ruler, Prithvi Narayan Shah in 1768. In the 19th century, gold mohur and silver dabals were issued as the currency but with time, the Indian currency also started circulating in the country due to insufficient coinage. The currency carried subdivision rate at 30 silver mohurs equal to 1 gold mohur equal to 1500 paisa. Also the Indian rupee and silver mohur maintained the same value and weight. In 1923, Nepal was recognized as an independent country by the United Kingdom and in 1932, a new currency was launched in place of mohurs and paisa that was Nepali rupee. The Nepali rupee had a slightly lower value than the Indian rupee due to lesser silver content and traded at a rate 1 Indian rupee = 1.28 Nepali rupee. In 1951, banknotes with Nepalese rupee denomination were issued for the first time. Initially, the government of Nepal was engaged in issuing the currency of the country this function of the government was taken over by the Nepal Rastra Bank after it got established in 1956. the Indian rupee which was still in circulation in the country was restricted to be the legal tender since 1966.

Factors affecting the exchange rates between two countries


The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

  • Flow of imports and exports between the countries
  • Flow of capital between the countries
  • Relative inflation rates
  • Fluctuation limits on exchange rate imposed by the governments of the countries
  • Merchandise trade balance
  • Rate of inflation in the country
  • Flow of funds between the countries for the payment of stock and bond purchases
  • Relative growth
  • Short term and long term interest rate differentials
  • Cost of borrowings
 
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