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The Great Indian Foreign Exchange Trap

Walking through Shanghai’s spanking new Pudong International Airport on my way out of the country last month and having found that I still had some Yuan left with me, I stopped at the foreign exchange kiosk to return the currency. “Can I have the ATM receipt or the original receipt for the currency ?” asked the lady behind the counter. I did not and I said so. “Sorry, we can’t take the currency,” she said. That was it, no further discussion.

I walked on and entered one of the rows of gleaming duty free shops and bought a CD by a famous Chinese pop singer. I asked the counter girl for her recommendation, she pointed with a smile. No questions asked obviously about the source of the currency. It struck me, as I walked on to the departure gates that if there was one area where China has not evolved, it’s the financial system. More on that at some other point but if there is one area that China is seemingly lagging behind the rest of the world, its this. But then I have repeatedly discovered, on matters of forex control, India can be worse.

Leaving once again, this time from Delhi, I stopped to buy foreign exchange. Let met put it simply. Buying foreign exchange in India is still a most cumbersome, painful and irritating task involving the generation of mountains of paperwork which, I can bet a thousand bucks (in dollars) no one ever reads. I wonder whether any self respecting law breaker (in the currency domain) will fill forms to pull out foreign exchange.

What Do We Do ?

Most currency shops not only make you fill out lengthy A2 (the name) forms and sign them but also take Xerox copies of your passport to store away in some vault which, presumably, the underworked Reserve Bank will scan at the end of the year. I mean they have to be underworked if they have the time to look at even a thousandth of the mounds of A2 forms and Xeroxes of passports. And if they do take time out to scan them, there is a bigger problem at hand.

If you have the time and don’t want copies of your passport floating around the countryside, all you have to do is source the same currency without a `bill’. Having tried it, its easier done than said. And since most of this activity happens (in Bombay) within roughly 2 square km of the Reserve Bank of Indian’s imposing headquarters, presumably they know about it too.

I usually ask the counter clerks why they do it ? Typically the answer is, “Rules sir, what do we do ?” True, what do they do ? Getting a licence to transact currency is not easily got and no one wants to speak up for fear of regulatory retribution. But with a $150 billion (China has over $600 billion) sloshing around in our reserves and crowing about it too, it’s a farce if we keep treating dollars like a flock of precious pigeons that will take flight to never return if set free.

As If Our Airports Are Not Bad Enough

The problem is not the paperwork as much as the delays it causes. Getting forex at Indian airports is the most time-consuming, frustrating task that you can possibly experience in a journey apart from of course, the airports themselves. If I may digress for two paragraphs, I can now add Kolkata to my list of personally experienced dysfunctional Indian airports. Try this for ingenuity: a full international flight comes in and the baggage is sent out on two separate caroussels to “speed up” the process.

Result: passengers start darting around like goal keepers trying to catch a ball that may fly in, thankfully the baggage is crawling and not flying but the pandemonium is no less. The belts themselves were perhaps built when we were still flying Avros, Caravelles and Dakotas so any aircraft with a passenger capacity larger than 25 is obviously difficult to handle.

Actually no, the carrousels themselves are okay sized (just okay) but they move with such amazing sluggishness, you wonder whether the folks who operate them take tea breaks whilst carting the baggage from the aircraft onto the terminal building. This happened last month. And I wonder how `modernising’ airports can solve this problem when half the (if not the whole) problem is with the people who man them.

Time To Change

Anyway, the miserable passengers who have no choice but to buy forex in India stand in lines that take at least 15 to 20 minutes and then spend an average of five to 10 minutes each at the counter going through the paperwork. The counter person rarely moves very quickly, given the very deadening nature of his or her task. On most occasions, the third or the fourth chap in the line has got restless and started shouting. On one occasion, it was me. The clerk didn’t give a damn. After all, the procedures were not his.

Should forex counters not maintain records. Sure they should, though countries with liberal forex flows don’t even bother with that. But if our guys insist on keeping records, why not just take the passport number, enter it into a form on the computer, store and print a receipt and give it back, with the currency. So, instead of 5 minutes, you can do it in perhaps 45 seconds or less. That’s how long it takes if you were to change currency in Bangkok or Heathrow airports, for example.

Most normal people `arrange’ for forex before they leave, legally or illegally. Forex shops even send delivery boys to your house with dollars so as to ensure you are spared the agony later. Of course, they still make you fill the paperwork and make the notings in your passport. Since it happens in the comfortable confines of your house, you are less inclined to protest.

Times have changed. Even the RBI knows that. So why must we persist with systems that are designed to frustrate or better still ensure non-compliance ? The RBI to be fair is reasonably pro-active. But this remains an area unattended and capable of making life most difficult for the ordinary traveler.


Anonymous said…
Accept certain inalienable truths, prices will rise, politicians will
philander, you too will get old, and when you do you'll fantasize
that when you were young prices were reasonable, politicians were
noble and children respected their elders. (Buz.L)....

Another inalienable Ethiraj truth, everyone wants to trouble you and china is the best thing that happened to this planet!!! ;-)
Anonymous said…
its not baz luhrman, he just made the video
NevYas said…
dude, read the advertising on your channel and buy a forex card. in the name of kyc things will only get worse with pan nos and mapin ids which any crook can circumvent

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