The effects of demonetization, Indian Prime Minister Narendra Modi’s most ambitious and controversial financial move is having a ripple effect outside of India. The scrapping of Rs 500 and Rs 1000 notes, wiping off of 86 per cent of the Indian currency in circulation, in November, sent India reeling into a crippling quagmire. While the dust has begun to settle in India with the new currency flowing into circulation and people getting past the harrowing days spent in serpentine queues, the shadows of demonetization are still dogging Indians abroad.
The government did not provide any avenue of exchange to the estimated 20 million nonresident and overseas Indians, who are stuck with an estimated Rs 700 crores in old currency abroad.
The government has granted nonresident Indians until June 30 to exchange their old demonetized currency at five Reserve Bank of India branches in Delhi, Mumbai, Kolkata, Chennai and Nagpur. Holders of the PIO (Person of Indian Origin) and OCI (Overseas Citizen of India) cards who showed up at the RBI branches, however, were in for a rude shock when they were turned away because the exchange facility was available only to NRIs holding Indian passports.
Bank officials have declined to clarify or meet overseas Indians and the Indian government has not provided any directions on what happens to the currency held by overseas Indians abroad.
Officials at the External Affairs Ministry, Ministry of Finance and Department of Economic Affairs in India did not respond to Little India’s repeated requests for comments. Officials at the Embassy of India in Washington D.C. acknowledged that they have been approached by OCI/PIO card holders and are aware of the issues, but have received no government directive on a response.
Ms Karamajeet Kaur, Third Secretary, Economic, Embassy of India in Washington D.C. said: “We did receive requests from diaspora Indians concerning their inability to exchange money and we have communicated it back to the Indian government. Since my role is to pass on the information and I am not the one who can draft policies, I have done the needful.”
She added: “Policies are made by the government keeping so many things in consideration and economic policies are big decisions that the government takes after evaluating so many factors. For the moment I can only say that we have conveyed the concerns.”
Mr L.T. Nghaite, Consul for Press, Information, Culture and Community Affairs at the Indian Consulate in New York, said in an email: “Issues relating to demonetization of currencies in India have since been solved and we have no further comments to make other than what have been highlighted in our website from time to time.”
Embittered OCIs
But the problem is far from solved for overseas Indians like Dr Himanshu Jain, professor of materials science and engineering at Lehigh University, Bethelehem, Penn., who travelled to India earlier this year and was unable to exchange his Indian currency. He says: “I came to the U.S. in 1974 and during this period of more than four decades we have made at least 40 trips to India. Every time we ended up saving some Indian money that kept getting collected. In between a few other things happened, such as my parents expired, leaving some cash at home. So when we went to India we had our own Indian currency accumulated over the years and also discovered some money lying around in the home left by my parents.
“Since this was hard earned purely white money, I had no reason to fear that I will lose it. I stood in a long queue at the RBI branch in Delhi to be rudely told that the rule to exchange old currency only allows NRIs and not American citizens with OCI cards. I was not allowed access to any bank official and wrote to several ministries, but no one has any answer for us. At last we came back to the U.S. leaving our hard earned money lying wasted in India.”
Jain is not alone. At 20 million, India has the world’s largest diaspora and many are embittered by the failure of the Indian government to offer solutions for currency exchange to them. They are particularly disillusioned that the Indian government’s promise that an OCI/PIO card guarantees them rights equal to that of an NRI has failed them.
Thomas Abraham, chairman of the Global Organization of People of Indian Origin (GOIPO), an international network of people of Indian origin, says his organization has received scores of complaints from overseas Indians around the world about their inability to exchange the demonetized currency.
The demonetization process has been criticized for its poor planning and execution, but in the case of overseas Indians. Thomas says, “The government did not overlook. Looks like, it has knowingly avoided OCI/PIO Card holders for depositing their demonetized notes since in its Notification of 31st December, 2016, clearly states that that Diaspora Indians with foreign citizenship are not eligible to deposit their old currencies.”
GOIPO has appealed to Prime Minister Modi and launched an online petition to urge the government to extend the deadline and make provisions for OCI cardholders to exchange their old currency.
As soon as the news of demonetization broke, foreign currency exchangers, such as Travelex, stopped all transactions with the old currency.
OCI Card Parity with NRI
The Central Government of India issues OCI and PIO cards to people of Indian origin to people who migrated from India or whose ancestors belonged to India. Holders of these cards do not have voting rights and are barred from purchasing agricultural property, although they can inherit ancestral property. The card facilitates visa-free travel to India for a lifetime, rights to residency, employment, etc. The PIO card is being phased out in favor of the OCI card.
The OCI scheme was introduced in 2005 by the Citizenship (Amendment) Act. Launched at the 2006 Pravasi Bhartiya Divas in Hyderabad in 2006, the provision grants an OCI cardholder all the rights and privileges accorded to Non Resident Indians on a parity basis. The differential treatment of OCI/PIOs from NRIs around demonetized currency has come as a surprise.
Nonresident Indians have been very supportive of Modi and the BJP, which is perceived as friendly to overseas Indians. They were also exceedingly supportive of demonetization as a drastic step necessary to tackle the parallel shadow economy, crack down on terrorists and counterfeit currency. So they were especially surprised to be the receiving end of the demonetization stick.
It is common for overseas Indians to hold left over currency from their occasional trips to India. Indians settled abroad also keep some Indian currency with them to avoid the hassle of currency exchange on their next India visit.
Abraham says, “Indian government has taken no measures to correct the situation. If the government does not do anything on this issue, our estimate is that over Rs 700 crores of the demonetized currencies still being held by diaspora Indians and OCI/PIO Card holders will be worthless papers.”
The problem extends even for NRIs who are permitted to exchange the money until June. Thomas points out: “Since Government of India is allowing only five RBI branches (Delhi, Mumbai, Kolkata, Chennai and Nagpur) to accept the demonetized currencies, it is not worth the effort to go to these cities for NRIs to exchange these currencies if the amounts are less than Rs. 10,000. It would cost as much to travel to these cities and stay there to get it done. GOI could have allowed NRIs to exchange or deposit the old currencies in any State Bank of India branch.”
Dallas, Texas based Alekhya Adipudi, who came to the United States as a five-year-old has been trying to obtain information about any provisions for OCI cardholders, but to no avail. She says: “When we heard about demonetization we got alarmed because we had some money kept in an Indian bank locker saved by my mom. Since making a trip all the way to India exclusively for this purpose did not make sense, we were relieved that the government has extended deadline. But from the experiences of other Indian Americans we are left disillusioned.” Adipudi, who is planning a trip to India before June, says: “I have been contacting my friends in the banking sector, but everyone maintains that they are unaware of any way to help us redeem our savings. I also made calls to the finance ministries and embassies, but the only responses I have got are that they will look into the matter, but are not sure of any immediate help.”
Several Indian Americans say that the failure to offer options, will likely drive some to turn to the very type of benami transactions demonetization was designed to discourage. Jain says: “I was advised in India that the only way I can exchange my money was to find a middleman who would do the needful for me for a commission. But I was against the idea of paying anyone an illegal fee for the money I honestly deserve.”
Adipudi agrees that she too had similar suggestions, but is not ready to go down that route: “Perhaps some may think that they will lose whole bunch of money, so why not lose only some of it to a broker, but then isn’t the whole purpose of eradicating shady practices that was the whole premise of this move, defeated.”
Damini Jain, a student who came to study in the United States last year, says: “I am aghast with this move. I have a few thousand rupees with me, which may not be much for the rich politicians helming this move, but for me that was my security blanket in a new country. Even before I could exchange it, they now sit in my drawer. It is the small inconveniences such as these that were not held important enough by the government and puts us off with this decision for ever.”
The feeling of betrayal looms large amongst Indians in the diaspora. Arjun Modi, of Venice, Calif., who signed the GOPIO petition writes: “I am a hard working OCI holder who has paid all taxes on time both to the Indian and the U.S. government. I should be given a chance to exchange my money as it is legally earned, white money. My OCI card states that we have parity with NRIs in educational, financial and economic fields. So why are we denied of it.”
He adds, “It was also stated that not one paisa will be lost by people who have rightfully earned it, but now OCI/PIO cardholders are losing thousands of money.”
Adipudi says: “Though I mostly grew up in the U.S. I went back to India for my graduation and worked there for two years. While there I paid my taxes and even paid a higher fee in college, because of my OCI status. It leaves an uncomfortable feeling to stomach that the Indian government is happy till we are paying our taxes or is happy to levy a higher educational fees on us, but when it comes to our rights we have nowhere to go.”
Thomas cites the Euro as an example the Indian government should use: “When the Euro was introduced in Europe, foreigners going to any of those countries with the old currencies were allowed to exchange their currencies even after a couple of years. Government of India must do the same to OCI/PIO cardholders for at least two years since they can’t go to India just to do the exchange.”
RBI RULES FOR OVERSEAS INDIANS
How can Indian citizens who were abroad exchange the SBNs?
In terms of Paragraph 4.1 of the GoI Ordinance No. 10 of 2016 dated December 30, 2016 on “The Specified Bank Notes (Cessation of Liabilities), a facility for exchange of SBNs is made available for the resident and non-resident Indian citizens (Indian passport required) who could not avail the facility from November 10 to December 30, 2016 on account of their absence from India during the aforementioned period. The facility will remain open for residents from January 2, 2017 to March 31, 2017 and for NRIs from January 2, 2017 to June 30, 2017 at five Reserve Bank offices at Mumbai, New Delhi, Chennai, Kolkata, and Nagpur.
The facility can be availed only in individual capacity and only on one occasion during the period. No third party tender is permissible under the facility.
Is the facility for exchange of SBNs by NRIs available outside India?
No. For NRIs the fcility is available from January 2, 2017 to June 30, 2017 at five Reserve Bank offices at Mumbai, New Delhi, Chennai, Kolkata, and Nagpur. The limit of exchange for NRIs will be as per the relevant FEMA Regulations.
Is the facility available to Overseas Citizens of India (OCI)/Persons of Indian Origin (PIO)?
No, the facility is not available to people who are not Indian citizen.
— Source: RBI Website