Cur­rency swap sets off end­less lines of frus­tra­tion In­dian merchants re­port plum­met­ing busi­ness

Kuwait Times - - BUSINESS -

NEW DELHI: The first peo­ple showed up at the bank long be­fore dawn, form­ing a line in the cold and the smog and silently wait­ing for the chance to with­draw their own money. They left more than seven hours later, each hold­ing the hand­ful of bills, worth $60 at the very most, that they’d been al­lowed to take home. By mid­day, the lines snaked back and forth across the park­ing lot out­side the Axis Bank branch in cen­tral New Delhi. Oc­ca­sion­ally, a po­lice­man car­ry­ing a long bam­boo club would slap some­one who stepped out of line. No one com­plained. In a crowd like this, largely work­ing-class and un­e­d­u­cated, no one talks back to a po­lice­man. Es­pe­cially not one car­ry­ing a club.

Des­per­ate for cash

“They keep telling us that that this is good, and maybe they’re right,” said Shahida Parveen, a 36-year-old woman whose fam­ily had al­most no us­able money left. “But I don’t see any­thing good hap­pen­ing.” This is just one bank, in one city, in a coun­try of 1.3 bil­lion peo­ple, mil­lions of them in­creas­ingly des­per­ate for cash amid a chaotic govern­ment ef­fort to crack down on cor­rup­tion by ban­ning high­de­nom­i­na­tion cur­rency notes.

Last week, Prime Min­is­ter Naren­dra Modi an­nounced in a sur­prise night­time TV ad­dress that all 500- and 1,000-ru­pee notes, worth about $7.50 and $15, would be with­drawn im­me­di­ately from cir­cu­la­tion, a move de­signed to fight cor­rup­tion and tar­get peo­ple who have been dodg­ing taxes by hold­ing im­mense stock­piles of cash, known in In­dia as “black money.” In a na­tion hob­bled by cor­rup­tion, and where less than 3 per­cent of peo­ple file tax re­turns, the plan at first earned wide­spread ap­proval. But as the days ticked by, it be­came in­creas­ingly clear that the govern­ment was ill-pre­pared for a plan that sud­denly pulled 86 per­cent of the coun­try’s money sup­ply out of cir­cu­la­tion.

Fam­i­lies be­gan hoard­ing small-de­nom­i­na­tion cur­rency, merchants re­ported plum­met­ing busi­ness and salaries went un­paid. Many busi­nesses were re­fus­ing to ac­cept the only new note rushed into cir­cu­la­tion, worth 2,000 ru­pees, be­cause they were un­able to make change for it. The govern­ment says it’s also try­ing to get new 500-ru­pee bills into cir­cu­la­tion, but they re­main rar­i­ties. Modi ac­knowl­edged the tran­si­tion to the new cur­rency might be briefly dif­fi­cult, but said the govern­ment “spent long hours try­ing to fig­ure out how to min­i­mize the in­con­ve­nience.”

“The poor are now en­joy­ing a sound sleep, while the rich are run­ning around to buy sleep­ing pills” be­cause of anx­i­eties over their hoarded money, he said. But in the park­ing lot out­side the Axis Bank, no one was talk­ing about a sound sleep. “This is only to ha­rass peo­ple like us,” said Parveen, a stay-at-home mother whose hus­band works as a small-time bro­ker for rental prop­er­ties, but has had no work for the past week. Hun­dreds of mil­lions of In­di­ans do not have bank ac­counts and use only cash. Many busi­nesses only ac­cept cash. “The peo­ple with all the black money, they’ll find a way to man­age.”

She’s right. The price of gold spiked in the hours after Modi’s an­nounce­ment, as the rich looked for ways to get rid of their old cur­rency. Ac­coun­tants say there has been a surge in ques­tions about laun­der­ing cash, with one say­ing a client had come in ad­mit­ting he needed to get rid of more than $5 mil­lion in dis­con­tin­ued notes. Oth­ers have used a range of ploys, from buy­ing ex­pen­sive train tick­ets that can be re­funded later, to get­ting fake receipts, back­dated to be­fore Modi’s an­nounce­ment, to make their black money look le­git­i­mate. “Do you see any­one with black money here?” de­manded Chote Lal, 59, who had taken the day off from his of­fice job to wait in line. “Only the poor are get­ting hurt. Who else is suf­fer­ing?”

A New Delhi busi­ness­man with con­nec­tions to un­der­ground cur­rency traders said it was still fairly easy to ex­change the with­drawn cur­rency - as long as you’re will­ing to pay twice the le­git­i­mate ex­change rate to get rid of the old notes. “They can take as much as you need to get rid of,” the busi­ness­man said, speak­ing on con­di­tion of anonymity to be able to speak freely about il­le­gal trans­ac­tions. How are money laun­der­ers get­ting rid of out­dated cur­rency? Some are pre­sum­ably us­ing cor­rupt bu­reau­crats or bank­ing of­fi­cials. Oth­ers, how­ever, are get­ting help from peo­ple in line at tens of thou­sands of banks across In­dia.

Some of those wait­ing at Axis, like Parveen, were there to ex­change their own money. She pulled a wal­let from her pur­ple-and-pink purse, re­veal­ing two crum­pled 100-ru­pee notes and two 50-ru­pee notes, worth a to­tal of about $4.50. It was all her fam­ily of five had left to spend, at least un­til she got to the front of the line and could ex­change 4,000 ru­pees in the old cur­rency. But it was an open se­cret that more than a few of those wait­ing with her were be­ing paid to ex­change cur­rency for wealth­ier peo­ple. “I’m not do­ing that, but many of these peo­ple are ex­chang­ing for oth­ers,” said Sahil Saluja, a young air­line em­ployee, ges­tur­ing around him. He even­tu­ally gave up wait­ing after more than four hours in line. The of­ten-shift­ing reg­u­la­tions al­low a one­time swap of 4,000 ru­pees, or about $60, in ex­change for smaller notes to meet im­me­di­ate needs. That limit was raised to 4,500 ru­pees yes­ter­day. The govern­ment in­sists the sys­tem will be back to nor­mal by the end of the year. Over­whelmed banks had no re­li­able way to en­sure that peo­ple didn’t line up more than once, so on Tues­day, the govern­ment an­nounced that banks would be­gin us­ing indelible ink to mark the fingers of peo­ple swap­ping scrapped cur­rency notes. In­dia uses the same sys­tem dur­ing elec­tions, to stop peo­ple from vot­ing re­peat­edly.

Old notes can be de­posited into bank ac­counts be­fore the end of the year, though the govern­ment says it will in­ves­ti­gate de­posits above 250,000 ru­pees, or about $3,700. Im­mense fines will be levied on any­one found to have been il­le­gally avoid­ing taxes. But for at least the next week, and per­haps many weeks, hours-long bank lines and strict lim­its on with­drawals (most peo­ple are lim­ited to about $30 a day), mean lots of frus­tra­tion ahead. The govern­ment, mean­while, in­sisted all was well. The “public need not be anx­ious,” said a week­end state­ment from In­dia’s na­tional Re­serve Bank. “Cash is avail­able when they need it.”

NEW DELHI: A se­cu­rity guard uses indelible ink to mark the fingers of peo­ple en­ter­ing to ex­change dis­con­tin­ued cur­rency out­side an Axis Bank branch in cen­tral New Delhi yes­ter­day.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.