RMA partially loosens its grip on rupee payments

 

The Royal Monetary Authority (RMA), at a meeting with the private sector yesterday, announced a host of changes to its earlier circular on the issuance of Indian rupee (INR).

One of the major changes was instructions to the private sector to open a rupee account for every manufacturing industry capable of exporting and earning rupee. In addition to the existing foreign currency (FC) account and Nu account, the rupee account will help the central bank to keep track of a company’s export proceeds.

The Governor Daw Tenzin said, “INR is a foreign currency which needs to be earned despite the peg parity.” RMA is now releasing INR through the foreign exchange counter and will be treated as a foreign currency like the USD. “Even if the INR shortage is resolved, Rupee will not be available at bank counters anymore”, he said.

Export earnings of a company will first be deposited into the INR account of which 10% will remain in the account, while 90% will be put into the Ngultrum account.

All operating costs of the company involving INR will be met from its 10% INR reserve. The company may use funds for transportation, buying materials, labor expenses, loading charges, among others.

However, a hotelier pointed out the grey area in the new directive stating that a major part of their foreign currency earnings comes in USD from tourists which doesn’t qualify them to open an INR account despite being able to earn hard currency.

The hotel industry requires INR for import of furniture and other materials.

Earlier, the central bank had placed a limit of INR 200 a day for each worker which triggered complaints from the construction industry as skilled workers were paid higher than the amount.

RMA has now increased the cap to INR 300 a day for each day worker at factories, especially in the border areas. Director of foreign exchange division of RMA Karma Rinzin said entrepreneurs in the capital tried claiming INR for day workers which was not possible.

Contractors, manufacturing companies and local industries need to make advance payment to bring new laborers from India.

INR 10,000 will be available for each worker for this purpose. The amount was decided after considering the complaints contractors lodged with RMA.

The monthly payment in INR for each worker has been increased to INR 7,000 from INR 5,000 for both construction companies and industries. Earlier, the payments were supposed to be made through overdrafts which didn’t work because of problems Indian banks faced in transactions.

However, the release of INR for any purpose needs to be backed by documents such as citizenship identity cards, approval letter from the labor ministry and letter of award in the case of construction works.

The new directive also includes guidelines for making payments to personal home builders. The amount of advance payment for new workers has been increased to INR 8,000 from INR 5,000 supported by documents.

Merchants importing goods can avail advance payment or credit payment. Advance payment could be made in full or partial in accordance to the Performa invoice. Karma Rinzin clarified that the invoice need not be verified by the customs department. RMA will be able to track cases where goods do not come in 91 days after the advance payment has been made.

Credit payments can be made by RMA within six months from the date of import. Karma Rinzin said there were cases where merchants came with receipts as old as 2009 and 2011 to obtain INR following RMA’s announcement to release INR if supported by receipts.

To send any kind of payments, tax receipt is mandatory following which the payment could be sent.

A consultancy fee for an Indian has to be made through the banking channels as overdraft except for an amount of INR 10,000.

INR required by tour operators or ticket agents will be released according to Performa invoice backed by other required documents.

The central bank has also segregated the rupee payments to Indian workers and for imports.

The new directives will be implemented starting next week after RMA’s meeting with the Indian banks and concerned financial institutions.