Demonetisation effect: Cancelled notes still sitting heavy in Myanmar’s purse

The famous Shwedagon or Golden Pagoda in Yangon attracts a large number of Indian visitors, most of whom donate to the Buddhist place of worship. In November 2016, when Prime Minister Narendra Modi announced the demonetisation drive, the pagoda had donations worth ₹56,500 in the cancelled notes.

The money is still lying demonetised, as the Indian central bank hasn’t given Myanmar the opportunity to convert the cancelled notes, worth ₹17,33,175, into legal tender.

The Indian currency was collected either as donations or as border pass fee at Tamu — the Myanmarese gate opposite to Moreh in Manipur — and was deposited with State-owned Myanmar Economic Bank (MEB) and Myanmar Foreign Trade Bank (MFTB).

Both the banks maintain vostro accounts with Kolkata-headquartered United Bank of India, which has correspondent banking relations with approximately 20 Myanmarese banks, including MEB and MFTB.

Vostro accounts are held by foreign banks in Indian banks for dollar-INR transactions.

The electricity authority in Tamu, for example, purchases electricity from the discom in Imphal, Manipur, at INR-denominated rates. The transaction is carried out through UBI, which pays the Imphal discom in rupees and adjusts the sum from MEB’s vostro account in dollars.

So, can’t MEB or MFTB deposit the cancelled notes in UBI? As per the law, cash deposits are not permitted in vostro accounts of overseas banks. However, there are instances of making exemptions of this rule.

A senior Myanmarese official said that following sustained persuasion from Myanmarese authorities, the RBI had in 2013 offered a special window for cash deposits in vostro accounts. He was talking to BusinessLine on the sidelines of a conference organised by the Institute of Social and Cultural Studies and Myanmarese think-tank MISIS, in Yangon, last week.

So why is it not allowing the exemption this time? No one knows.

The Myanmarese official says both his country’s central bank as well as UBI have made repeated appeals to Indian authorities over the past one year.

The requests apparently fell on deaf ears. “We haven’t received any response from the Indian authorities,” the official said. “The silence is disappointing.”