This post was originally published on 28 November 2016.
Almost three weeks after India government announced demonetisation of 500 and 1000 rupee notes, a large section of NRIs are still finding it hard to send money to their families back home.
According to a report on Gulf News, due to currency shortage, families back home are unable to collect cash from money transfer agents. Even for those who are sending to bank accounts, it is difficult to withdraw cash from banks due to restrictions in withdrawal.
Remittances down even with high exchange rates
The cash crunch has badly hit rupee remittance transaction to India through bank transfers and instant cash transfers, according to the staff at some money exchanges in Abu Dhabi.
Moreover, the situation has deprived Indian expatriates of an excellent opportunity to cash in on a record low exchange rate of rupees.
The Indian rupee fell to a record low of 68.86 against the US dollar on Thursday, making one dirham worth 18.7 rupees. Even on Sunday,there were not many customers to send money to India.
“We used to do at least 250 transactions of Indian rupee a day, which has gone down to between 70 and 80. Around 60 to 70 were instant money transfers to India, which have been reduced to six or eight a day because collection centres in India do not have currency notes to disburse to their clients,” a money exchange employee told the daily.
The rupee is expected to see further depreciation in the coming months and may breach the 70-level (against the dollar) by December and touch 72.50 by the end of 2017, says a Deutsche Bank research report.
Instant cash transfers more popular in rural areas
“I sent money for my family’s monthly expenses, but my son is unable to withdraw money from the bank because of long queues,” said Shamseer Singh, 55, who works with an insurance company in Abu Dhabi.
He said many blue-collar workers from his state of Punjab depend on instant money transfers, which are very convenient for their families to collect from nearest post offices or shops. Most of the instant cash services have collection points in almost every village where there are no bank branches at all. “They are confused now how to end money,” Singh said.
Rural population in India have limited access to banks and almost all transactions are done in cash. So money exchange houses rely on small shopkeepers and post-offices for disbursal of cash remitted by expatriates.
A money exchange employee said workers from Northern Indian villages, where access to banking system is limited, mainly depend on instant cash transfers.
Confirming the continuing currency crunch at their collection points in India, Western Union said on Sunday that in addition to cash payout, they were facilitating direct to bank account services and providing consumers an option of receiving remittances via account payee cheques.
Sudhesh Giriyan, COO of Xpress Money, said that despite a reported improvement in the situation in India, money transfer brands are still disbursing small amounts in cash, while higher amounts are given in cheques or through online bank account transfers.
Sudheer Shetty, president of UAE Exchange, however, said between 70 and 80 per cent remittance transactions to India are through banks and the remaining are through instant cash transfers.
Only middle class and upper-class Indian expatriates in the UAE are waiting and watching, as they believe the rupee will fall further.
Even most among them have to spend a certain amount every month back home to pay their loan or mortgage instalments and investment commitments, he said.