Will Jaigaon accept Ngultrum?

(Phuentsholing) Government’s attempt to ease the rupee crunch by directing the financial institutions to close all accounts of non-resident foreigners, could adversely impact the country’s economy.It is likely to hit the business in the border towns hard and may also dent the trade relations between the two border towns.Impact ,Soon after the notification was issued by Royal Monetary Authority (RMA) to do away with bank accounts of non-resident foreigners, hundreds of Indians queued up outside the banks in Phuentsholing to close their accounts.

“Where to keep our money is not at all a problem as we have so many banks in Jaigaon and nearby towns. The problem that I foresee is how smooth will be the flow of business with our Bhutanese counterparts, who have to deal with us almost everyday,” said Rajesh Kumar, an Indian businessman.

He added that with the strict currency exchange regulation in place, traders in Jaigaon may stop accepting Bhutanese Ngultrum altogether.  

Similarly, another Indian businessman said till now exchanging Bhutanese Currency (BC) with Indian Currency (IC) wasn’t a problem as many had  personal accounts in Bhutanese banks where the IC was readily available.

“We had been accepting BC for any business transaction but now we have to think on whether to accept or not because if exchange facility is not there then there is no point in accepting Ngultrum,” he said.

Further, a restriction has been imposed by the Reserve Bank of India on the use of BC on Indian soil, including the border areas. Hence, if the Jaigaon traders decide not to accept Ngultrum as a medium of transaction then Bhutanese businessmen will come under tremendous pressure to arrange IC for making payments to their Indian counterparts here.  

The complexity in the currency exchange process led the nearby Indian town of Birpara, Siliguri and Alipur to stop accepting BC few years ago.

Most local businessmen BT interviewed say that the RMA regulation will not affect those people involved in export, manufacturing and other mega projects but it will, however, render a huge blow on the small entrepreneurs and retailers.

“We have to deal with them everyday and for everything. Banks do not give us more than Nu 50,000 a month in exchange and it is not adequate given that we sometimes do business worth over Nu 500,000 in a single day,” said a local retailer.

Meanwhile, many unofficial exchange counters have sprouted in the market, both in Jaigaon and Phuentsholing, in the past few years. They facilitate the exchange by charging commission, which affects the value of the two currencies that are otherwise pegged at par.   

“Unofficial payment of commission for exchanging currencies will definitely create an unfavorable balance of payment,” said Phuntsho, a banker, “While exchanging the currencies if we don’t get the equivalent amount then our currency gets devalued.”

The devaluation will make domestic goods cheaper and foreign goods expensive. Since Bhutan is totally dependent on Indian goods, it will lead to more outflow of Ngultrum. “This will certainly create inequitable exchange of rupee vis-à-vis the Ngultrum,” he added.

For every thousand rupees, these illegal facilitators charge a commission of Nu 10. It sometimes goes up to Nu 50, depending on the demand for rupees.

“When we are left with no other alternatives, we land up in their counters and end up paying whatever commission they charge,” said one businessman.

An Indian who operates an unofficial exchange counter said the demand for Rupee has skyrocketed in past two weeks. Despite the huge demand, he added, he continues to charge just the usual one percent commission per every Ngultrum 100.

However, a private employee, Tshering Dorji, said the same person asked him Nu 500 for exchanging Nu 10,000.

“Since our export is far lesser than what we import, we may land up paying extra money,” said another local businessman, who had to pay Nu 1,000 last week while exchanging Nu 50,000 from one such unofficial counter in Jaigaon.

Meanwhile, apart from those Indians having valid Bhutanese business licenses, there are over 300 Indians who will have to close their accounts with the three banks in the town.  

Source:bhutantimes.bt