The RMA Governor, Dasho Penjore and the Jaigaon Merchant’s Association General Secretary, R.S Gupta both said that as a result of the Rupee exchange counters, the informal Ngultrum and Rupee parity had been restored.
Not long after the 2012 Rupee crisis, the shortage of rupee and limited means to exchange it lead to the Ngultrum informally depreciating as much as by 10 percent against the INR in Jaigaon, bordering Phuntsholing. This meant that Bhutanese customers buying goods in Jaigaon, using the Ngultrum had to pay around 10 percent more for all goods.
Even until recently, before the Rupee counters opened in Thimphu and Phuntsholing, the rate varied between five and four percent.
Dasho Penjore said, “The parity has been restored and the confidence has been brought back in the Ngultrum. The merchants across the border are also happy.”
He said that the strength of the Ngultrum had even been restored even in faraway places. “Now we are told that there is no such thing as a premium and people have no problems even in Siliguri,” said Dasho.
There are people who come in from Siliguri, Alipurduar and Hashimara at the rupee exchange counters in Phuntsholing.
The RMA Governor said that the best thing about the whole exercise was that even with the exchange counters, the outflow of INR was as same as in normal times at around INR 400 mn a month. He said that initially people were withdrawing up to Nu 14 mn a day but this has now come below Nu 8 mn a day.
Dasho said that it was very important to restore the informal parity from the macro-economic point of view as 90 percent of Bhutan’s trade is with India, and so any difference in parity caused problems for trade in goods and services.
The vocal Jaigaon Merchant’s Association General Secretary, R.S Gupta said, “Before the rupee counters opened, shops in Jaigaon were charging an extra four percent premium to Bhutanese customers using the Ngultrum. However, this has now stopped due to the rupee counters and both currencies now hold the same value.”
He said that now any Bhutanese could walk into any shop in Jaigaon and pay in Ngultrum, the same amount they would have paid in rupees.
The same R.S Gupta sang a very different tune in 2012 when in response to Indian traders being asked to close their bank accounts in Bhutan, he is reported to have told shopkeepers not to accept any Bhutanese currency in Jaigaon at all.
The R.S Gupta of today denied that he made any such statement and in fact he said that any Bhutanese customer facing any problems or being asked to pay extra should contact the Association.
He said that the RMA facility of exchanging INR 50,000 a day by showing voter cards was very beneficial for smaller Indian traders. He said that it was also good that for amounts beyond INR 50,000 the counters accepted Indian PAN Cards and issued demand drafts.
On reports of certain shops still charging a one to two percent premium for people coming from Siliguri for collection, Gupta said that it may have happened a month ago but even that practice has stopped.
He said just after a week of the rupee counters opening in Phuntsholing the traders in Jaigaon started accepting Ngultrums at the same value as INR. He said now with almost two months since the INR counters opened there were no problems at all and shop staff in all outlets had been instructed to not harass Bhutanese customers for premium rates.
Gupta said that the Association has requested the RMA to allow Indian traders to open bank accounts in Bhutanese banks as it would make all trade transactions easier for both sides. He said the RMA had said it would discuss the issue with the Reserve Bank of India and see what can be done.
The Bhutan Chamber of Commerce and Industry (BCCI) deputy Secretary General, Kezang, said that the earlier rupee shortage had created an imbalance at the border and so the rupee counters had helped restore the balance and ensure parity.
He said that currently companies exporting and earning rupee are allowed to retain around 10 percent of their earnings. He said it would make things easier if the companies were allowed to retain a higher percentage for payments.
The RMA already allows companies to import goods and make payments in INR using the banking channel.
The RMA Governor said that apart from the parity being restored the pressure on the banks for INR had subsided and so there was no long lines, rush for tokens, etc.
The Governor, however, said that such measures would help in the short to medium term, but in the long run the only way was for government policies to increase exports and reduce imports.
He said that, at the moment, RMA is sitting on around INR 15 bn and USD 800 mn.
The Governor said that the Central Bank will now be focusing on other important areas like credit and monetary policy, bank systems, etc.