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Modi leaves NRI’s high and dry with his demonetisation move

(Originally published on

If the reaction of people on social media is anything to go by, Narendra Modi’s bold and daring move to demonetise 500 and 1000 rupee notes is wildly popular.

It has effectively destroyed the illicit ‘savings’ of corrupt individuals throughout India overnight. Funds for terrorism and illicit activity will run dry for now, while the Indian economy gets a boost.

However one of the aspects that seems to have been overlooked is the impact on NRI’s. Some NRI’s with these notes, who don’t have NRO accounts will have trouble sending their money back to India to be changed. What are they supposed to do?

Current advice lists a few major options. None of these are available to NRI families who are not planning to visit India within the specified timescale. Many of them

may have significant holdings of rupees in cash form for ready use on arrival back home. It represents one of the few negative factors of an otherwise good policy.

Indians living abroad are among Mr Modi’s biggest supporters. They deserve better than being left in the lurch in this way.

The currently listed options on cash returns are narrow. An Indian living abroad can physically take the cash with him or her to India when they visit or send it back via friends and relatives and deposit it in their NRO accounts.

The problem with this option is that it has to work within the constraints of time and personal finances, not to mention work. An Indian living abroad has a matter of months to physically return to India with rupees to be converted.

The next option, using money exchange in the country they currently reside in to convert 500/1000 rupee notes to local currency at their existing exchange rate may or may not be viable, depending on whether the local foreign exchange offices will take those notes anymore.

Indian banks such as The State Bank of India and ICCI Bank are not accepting these notes. Neither are banks such as HSBC who have a significant presence in India.

If your currency is held in India, then the option according to RBI is to let someone else deposit the rupees on your behalf, but they must provide approved forms of ID and an authorisation letter from you, if the amount exceeds Rupees 50,000. This seems plainly obvious to those with relatives in India. The drawback to this one is quite clear.

While Narendra Modi remains India’s most popular and effective leader in over two generations, the fact remains that sometimes his policy initiatives do not appear comprehensively thought through.

This is particularly the case with the impact on NRI’s of his new demonetisation policy. It might be an idea for the Indian government to establish a clear channel of communication with Indians abroad so that they are not caught by surprise in future.

Perhaps one solution could have been the Indian government appointing a specific bank in foreign countries to collect the money on behalf of Indians living abroad.

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