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Wed 30 Nov 2016 09:44 AM

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UAE exchange houses await guidance from India on scrapped banknotes

Prime Minister Narendra Modi abolished Rs500 and Rs1,000 notes earlier this month

UAE exchange houses await guidance from India on scrapped banknotes
Indian Prime Minister Narendra Modi. (Prakash Singh/AFP/Getty Images)

Exchange houses in the UAE are still awaiting notification from the Indian government on how to deal with the issue of India’s scrapped Rs500 ($7.28) and Rs1,000 ($14.57) currency notes almost three weeks after they were abolished.

UAE exchanges have already stopped accepting these notes, after Indian Prime Minister Narendra Modi announced they would be discontinued in an address to the nation on November 8. He said the move was aimed at tackling the menace of black money in the country. The two currency notes account for almost 86 percent of the cash in circulation.

“Money exchange service providers in the UAE have stopped accepting the Rs500 and Rs1,000 denominations at their counters until further intimation from the Reserve Bank of India (India’s Central Bank) or the Indian embassy,” Y Sudhir Kumar Shetty, president of UAE Exchange, told Arabian Business.

“We are still awaiting intimation on the way forward and until then no exchange houses are issuing Indian currency notes,” he added.

Foreign branches of Indian banks have already stopped accepting Rs500 and Rs1,000 notes, with Bank of Baroda, the only Indian bank authorised by the UAE Central Bank to accept cash, is following suit.

As of now, non-resident Indians (NRIs) can send the money back to India or authorise someone back home in writing to deposit the old notes into their non-resident ordinary (NRO) account. Those having large sums of money will have to disclose the source of the money to tax authorities or face penalties.

On Saturday, RBI Governor Urjit Patel told Press Trust of India that the bank was monitoring the situation arising from the sudden withdrawal of the rupee notes on a daily basis, admitting that new notes were hard to come by in rural areas.

He also urged people to start using cash substitutes such as debit cards and digital wallets so it would help India “leapfrog into a less-cash economy.”

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