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NRIs and India’s demonetization

NRIs and India’s demonetization

nri-demonetize-2By Jyotsna Singh

As the clock struck 8 P.M. on the evening of November 8, an address by Prime Minister of India, Narendra Damodardas Modi took the country by surprise. Almost 86% of cash in the economy had been declared unfit for transaction from the next day. The address declared that after 12 midnight, i.e. within four hours, currency denomination of Rs 500 and Rs 1000 could not be used for buying anything and had to be exchanged from the banks. Some services were exempted from the chaos that was bound to set-in.

The more than one billion population of India suddenly sprung into action and started consuming Rs 500 and Rs 1000 notes on petrol pumps, government owned grocery stores such as Kendriya Bhandar, government hospitals etc. Those who were holding large sums in houses rushed to gold stores within hours and bought insane amounts of the yellow metal. The big jewellery stores across cities and towns of India were open till early morning of November 9, converting black money of the elites into gold.

Far away from India, Archana Dwivedi, visiting Abu Dhabi, was at a loss. A resident of Chandigarh, she had gone to Dubai for six months on a work related project. She had Rs 25,000 in Indian currency and had no plans to come to India before March 2017. “I usually carry cash because I board international flights from Delhi and there can be emergency while travelling between Chandigarh and Delhi,” said Dwivedi in a Facebook conversation. She said she will have to lose that money. With a monthly salary of nearly Rs 50,000, this is a big amount for her to lose.

But some people outside India found ways to overcome the problem. Meghna Singhal brought Rs 60,000 with her when she came to Bangalore to attend her cousin’s wedding. Though she is settled the United States, she said it is common to find Indians with domestic currency. “In Indian culture it is common to give cash when someone is leaving home, especially for a year or so. Whenever we go back to the US after visiting India, relatives such as grandmothers give cash as a token of love. All that goes in our purses and wallets,” said Singhal. She said that as soon as news of demonitisation came, she started getting calls from friends asking her to take their money to India for exchange.

“One friend gave me Rs 30,000 and four relatives gave around Rs 30,000 combined. I had to exchange this big an amount,” she said.

But exchanging that amount was not easy because daily limit of obtaining new currency was Rs 4000. In practice, most banks were giving only Rs 2000-2500. Singhal needed an account to deposit the entire amount, which could be withdrawn only later. “But we had not used the account (in a private bank) for more than two years and hence activating it was in itself a uphill task before being able to deposit old currency,” she said. In all she and her family spend five days to figure everything and spent better part of the visit on this exchange rather than the wedding they came for.

A banker with Axis Bank said, on condition of anonymity, that NRIs had limited options.“Non-resident Indians can deposit old currency in non-resident ordinary rupee account (NRO). However, this facility is not available everywhere,” he said.

And he was right. Singhal said she and her friends could not exchange through NROs. The situation in a country like Mauritius is no different.

Anshley Dave Venkataswamy’s family settled in Mauritius two generations ago. But they have retained links with India in many ways – he graduated from Delhi University and married his sweetheart Ruhi, an Assamese from Guwahati. The family visits India every alternate year and deals in a lot of cash. “My cousin Chinasamy Ramakrishna has nearly a lakh in cash. He tried but could not convert into new currency anywhere. No bank is taking it,” said Venkataswamy.

As they visit India in December this year, they do not know how to cope with the changed system.

“The exchange rates have gone up since demonetization. Official exchange rate of Mauritian Rupee is 62, but we are not getting it for less than 68. Withdrawal limit is Rs 2000 at ATMs in India. I do not know how to manage. We generally eat at small restaurants and shop from roadside. This time we will be eating at costlier restaurants as only they keep swipe machines,” said Venkataswamy. He said there is no way of exchanging even dollars into new currency notes.

Tourists like Venkataswamy are a major source of income during holiday season for small traders and artisans who have shops in places like Dilli Haat (an artisan’s village in Delhi) and fashion street in Mumbai. But the dealings are all in cash as most of the shopkeepers do not have bank accounts. This economy has been hit by demonetization of 2016.

The banker from Axis Bank said that NRIs who are not travelling to India should soon look for someone who is visiting India. “They should send old currency to their families along with authorization letter. Only then someone else can deposit in their account,” he said. An authorization letter from an account holder or owner of cash enables a friend or a family member to deposit cash in the person’s name. It is important because the current limit of deposit is Rs 2.5 lakh and out-of-line transactions are being investigated by the government.

The demonetization drive taken all and sundry by storm. While the only options with NRIs are NRO and sending money back home, these system is not ready to accommodate either of these two. The only hope for them is some announcement which can look at their problems specifically after December 31 is over.

Jyotsna Singh is a freelance writer on economic issues with India’s leading Financial newspapers

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