Kathmandu, Feb. 3 -- The central banks of Nepal and India are exploring the possibility of using the interbank market-one of the most important segments of the foreign exchange system-to allow the transfer of Indian currency between banks in the two countries in large volumes.

Although Nepal formally allowed the circulation of Indian currency notes above INR100 up to a limit of INR 25,000 per person by publishing a notice in the Nepal Gazette on January 12, Nepal Rastra Bank (NRB), the country's central bank, has yet to issue a circular implementing the provision for banks and financial institutions.

Guru Prasad Paudel, spokesperson for Nepal Rastra Bank, said that NRB and the Reserve Bank of India (RBI), the central bank of India, are ...