Nepal’s delicate dance: Encouraging Indian tourists, controlling the costs

Nepal’s tourism sector is caught in a paradox: Indian visitors are welcome, but their wallets are not.

While Nepal’s central bank insists there is no limit on how much Indian tourists can bring, confusion persists at the borders — and the consequences are real. Detentions, fines, and a patchwork of outdated regulations are deterring precisely the kind of spending Nepal’s tourism industry desperately wants to encourage.

The issue came to a head last week when Chandra Prasad Dhakal, President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), called for an urgent policy revision.

Speaking during a pre-budget session in Kathmandu, Dhakal urged the government to allow Indian tourists arriving by land to bring up to the equivalent of US $5,000 — matching the current allowance for air travelers. The existing overland cap of ₹25,000, he argued, is “outdated and economically self-defeating.”

“India’s middle class has exploded,” said Dhakal. “Nepal should be capitalizing on this, not constraining it.”

Voicing deep frustration over the persistent challenge of transferring money from Nepal to India, Rohit Wadhwaney, Education Post’s editorial chief, who is a high-frequency Nepal traveler stated, “You can spend freely in Nepal, but the critical barrier lies in the inability to send money back home to India.”

“Activating your Paytm at the border to enable transfers is not only inconvenient — it’s a cumbersome obstacle that disrupts lives. Personally, I’ve been unable to send funds to my spouse for her urgent medical expenses. This isn’t just a technical glitch but a harsh reality affecting so many Indians and their families.” he added.

Currency confusion: A tale of two policies

Nepal Rastra Bank (NRB), the country’s central bank, insists the problem isn't on their books. “There is no restriction on the amount,” said Revati Prasad Nepal, head of the bank’s Foreign Exchange Management Department. “Up to $5,000 is allowed — as long as it’s declared.”

But the friction lies elsewhere.

In 2015, the Reserve Bank of India imposed a regulation capping Indian citizens from carrying more than ₹25,000 in high-denomination notes to Nepal and Bhutan. Making matters worse, Nepal itself has banned the use of Indian currency notes above ₹100 — a legacy of India’s demonetization move in 2016.

These overlapping rules have created a bureaucratic minefield. Many Indian travelers — especially those entering by road — unknowingly violate regulations, leading to fines or detentions. In February, a Turkish cardiologist was arrested at Tribhuvan International Airport for carrying ₹96,000. Lawmakers are now questioning what message such incidents send to foreign guests.

“This isn’t just a legal issue — it’s a reputational crisis,” said Nepali Congress lawmaker Sunil Sharma during a parliamentary session in February.

Border frustrations and business fallout

Tourism stakeholders across border towns are raising red flags. Diwakar Khanal, president of the Regional Hotel Association in Nepalgunj, believes the cash restrictions — and the ban on ₹500 and ₹1,000 notes — are stifling local economies.

“These tourists come here to spend money,” said Khanal. “Why are we stopping them?”

Long queues and vehicle checks at the borders add to the frustration, discouraging tourists from Uttar Pradesh and Bihar — states that form the bulk of Nepal’s Indian tourism traffic. Casinos, in particular, have seen revenues plunge due to the denomination ban.

Meanwhile, in Bhairahawa, hotelier Chandra Prakash Shrestha admits even seasoned tourism professionals were misinformed until recently. “We thought there was a cap on the amount. Turns out, it’s the denominations that are banned,” he said. “But the impact is the same — tourists can’t spend freely.”

Shrestha argues the current rules are not just impractical, but economically counterproductive. “Expecting a tourist to carry bundles of ₹100 notes is absurd,” he added. “This policy needs to go.”

Digital payments: A partial fix

In an attempt to ease the burden, Nepal introduced QR code payments for Indian tourists in March 2024. While effective in urban centers, digital infrastructure in rural and trekking regions remains patchy, undermining the potential of adventure tourism — a rising trend among Indian travelers.

“The system is inconsistent,” said Khanal. “When it fails, tourists are left stranded — without cash or connectivity.”

The numbers don't lie

Before the 2015 earthquake, roughly 1.2 million Indians visited Nepal by land each year. Estimates now suggest that figure may have reached 2 million. But due to informal entries, many are not counted in official statistics.

By contrast, just over 317,000 Indian tourists arrived by air in 2024. And while overland tourists may spend less per capita (about NPR 11,310 per person), their sheer volume makes them critical to the survival of many border hotels — especially during Nepal’s off-season.

Destinations like Chitwan, Pokhara, and the Kailash Mansarovar route via Nepalgunj have all seen booming traffic from Indian visitors. Yet, hoteliers argue that the spending potential remains shackled by rigid policies.

A missed opportunity?

The restrictions date back to a series of reactive decisions: India’s 2016 demonetization, followed by Nepal’s 2019 circular banning even new denominations like ₹200, ₹500, and ₹2,000. Despite these being legal tender in India, Nepal’s financial institutions and businesses are barred from accepting them.

Officials at Nepal Rastra Bank say they have not yet initiated talks with India to revisit the regulations, citing an often-tense bilateral relationship.

Yet entrepreneurs like Shrestha believe this inertia is costing Nepal millions.

“We’re trying to grow our tourism economy,” he said. “But unless India and Nepal align their policies, we’re only sabotaging our own potential.”