Demonetisation: Cash transfers to India take a hit as liquidity crunch prevails

Move has resulted in 15-20 per cent fall in business of exchange houses

  
Image used for illustrative purpose. An employee counts Indian currency notes at a cash counter inside a bank in Kolkata June 18, 2012.

Image used for illustrative purpose. An employee counts Indian currency notes at a cash counter inside a bank in Kolkata June 18, 2012.

REUTERS/Rupak De Chowdhuri
05 December 2016
Muscat - Almost a month after the demonetisation of R500 and R1,000 currency notes, the move has affected remittance to India, resulting in 15-20 per cent fall in business of exchange houses.

The bulk of the cash transfers to India are done by blue-collar workers (as against bank to bank transfers) who mostly hail from rural areas, where the liquidity crunch has still not improved much.

“People are not getting cash immediately as money transfer agents in India are struggling due to the liquidity crunch. They are offering payments through cheques or asking people to come at a later date,” said Madhusoodanan R, general manager, Global Money Exchange. 
He added that this has had a direct impact on his business but situation has improved over the last few days. “There has been an impact of about 10-15 per cent fall in cash transfers, but bank to bank transfer business is still strong,” he said.

P K Subudhi, general manager, Mustafa Sultan Exchange, too said that there has been a direct impact on his business. “Last month it was huge, but currently it could be around 15-20 per cent less.” He added that sending cash could still be a problem to smaller towns but transfers to bigger cities have improved greatly.

Tonny George Alexander, director, Oman UAE Exchange, said that there was a problem in cash transfers which has affected his business. He didn’t quantify the decline but said that there was a significant drop.

Mohammed Aleem, an optometrist in Muscat, who will be travelling to India next week for his wedding, said that he doesn’t know how he will arrange funds for his marriage. “As there is a limit to direct withdrawal of money from bank accounts in India, I was hoping to transfer cash directly to my family to meet immediate expenses for the wedding. But that is not the case, which has made things difficult for my wedding.”

Meanwhile, Madhusoodanan, who attended a high-level meeting held in Muscat on Thursday by State Bank of India (SBI), said that soon there could be a decision about NRIs holding the demonetised currency. “First, the situation needs to get better in India. For NRIs, there is no emergency as they don’t need the Indian currency for their daily transactions. But I can assure that no NRI would stand to lose his money,” he said.  

The Indian government too has announced some measures.

It has formed an inter-ministerial committee to look into concerns expressed by NRIs, tourists from abroad and foreign missions over demonetisation, stated the Ministry of External Affairs (MEA), India.

© Muscat Daily 2016

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