Neighbouring countries feel the heat of demonetisation

When a strong regional currency takes the demonetisation route, people in the entire region will face problems.

The banning of ₹500 and ₹1,000 currency notes by India has been a hotly debated topic in Nepal, Bhutan, Bangladesh and even in Myanmar, especially the areas bordering India, this morning.

From unofficial money transfer and changing agents better known as Hundi , to common citizens and traders, whosoever holding Indian currency are complaining serious inconvenience. To add to the loss, the selling pressure brought down the conversion rates of Indian currency in unofficial markets.

Bhutanese are the least affected as their financial system is directly synced to India. Bhutanese currency is pegged with Indian currency at 1:1, and Indian currency is legally tradable in Bhutan.

Since the country’s central bank offers Indian currency at least hassles, there is not much case for hoarding it, either.

“I heard the news this morning. It will cause inconvenience to religious travellers to India,” said Sonam Tshering, a former diplomat turned consultant. This is the peak season for Buddhist Bhutanese to visit Bodh Gaya in Bihar and monasteries in Sikkim.

According to Kesang Wangdi, Deputy Secretary General of Bhutan Chamber of Commerce and Industry, the country’s central bank is yet to issue any notification with regard to the demonetisation.

But many in Nepal and Bangladesh are seriously hit.

Rajendra K Khetan, owner of Laxmi Bank and a top industrialist in Kathmandu, said at least 1 lakh people in Nepal have a minimum of ₹10,000-1 lakh Indian currency in their possession.

Most of this cash pile is in ₹500 and ₹1,000 notes, which is not legally allowed to enter Nepal. The cash comes to use either for trading or to meet frequent travel expenses to India for medical and education purposes.

“It is good for Nepal as black money will go out,” he said. With a highly deficit balance of trade with India, Indian currency is in high demand in Nepal.

However, Khetan may have underestimated the stockpile of Indian currencies in Nepal. According to a trader in the border town of Birgunj, in Nepal, each of his 20-odd staff has some amount of Indian currency in possession.

A Nepalese journalist in Birgunj confirms the view. “I have ₹27,000 Indian currency,” he said. He should now either try to exchange these currency notes through his Indian connections or brave a deeper discount at the local Hundi operator.

Indian currency is selling at discounts at every border. According to David Thangluaia, a trader in Champhai, bordering Chin province of Myanmar, exchange value of ₹1 is down from 18.50 Myanmar kyat to 18 overnight.

According to Shaquib Quoreshi, Secretary of Metropolitan Chamber of Commerce and Industry in Dhaka, officially, demonetisation of Indian currency has negligible impact in Bangladesh as the financial systems are detached. Also Bangladeshis are not allowed to stock Indian currency.

But the reality is a little different. According to Asjadul Kibria, Planning Editor, The Financial Express, in Dhaka: “A good number of Bangladeshis who occasionally travel to India have some notes of ₹500 and ₹1,000 in their moneybags. Small importers and traders who settle bill in cash also have good amount of the cancelled notes.”

Over 11 lakh Bangladeshi travelled to India, mostly for medical purposes, in 2015, up from 9.4 lakh in 2014.

In fact, as this correspondent called people in Bangladesh, many were concerned about the fate of the Indian currencies in their possession.

“I was in Bhutan recently and was given some ₹3,000 (Indian currency) change against some buying in dollars by a crafts seller. I thought I will get it changed on my next visit to India,” regretted a Bangladeshi professional.

Bangladeshis currently visiting India for medical purposes are facing major problems.

Arifur Rahman Farhad (38), an IT engineer from Bangladesh, is stuck with nearly ₹40,000 worth of high-denomination Indian currency. He is visiting Bengaluru for medical attention.

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