External Affairs

Delhi’s Diplomatic Community Seeks Relaxation in Post-Demonetisation Withdrawal Limit

The finance ministry has formed an inter-ministerial panel which will discuss and give recommendations on the demand of foreign diplomatic missions to increase the limit on withdrawals from embassy bank accounts, MEA announced today.

An employee uses an electronic machine to check an Indian currency note inside a bank in the northern Indian city of Allahabad December 16, 2011. The Indian rupee jumped more than 2 percent on Friday and was on track to post its biggest single-day rise in more than two years after the central bank took steps to stem the currency's plunge to a series of record lows. REUTERS/Jitendra Prakash (INDIA - Tags: BUSINESS) - RTR2VBAD

The Ministry of External Affairs has urged the foreign ministry asking it to devise exemptions to the demonetisation measure for Delhi’s diplomatic community. Credit: Reuters

New Delhi: Shortly after the demonetisation of Rs 500 and Rs 1000 notes by the government last week, the Ministry of External Affairs (MEA) wrote to the finance ministry asking it to devise exemptions for New Delhi’s diplomatic community since the embassies were facing difficulties in their day-to-day operations and were receiving a deluge of complaints from their citizens who are stuck in the country without any money. A week later, an inter-ministerial committee has been now set up, which will meet soon to consider their appeal.

Dominican Republic ambassador Frank Hans Dannenberg Castellanos has had a rather harried week and there are no signs of it getting any better.

As the dean of the diplomatic corps, Castellanos has to represent the concerns of over 150 embassies and high commissions in Delhi. Since November 9, a day after Prime Minister Narendra Modi announced that high-denomination notes of Rs 500 and Rs 1000 would no longer be valid, Castellanos has been trying to find a solution to the complaints that have been pouring in from his colleagues.

Castellanos told The Wire that on the very first day he received calls from over 30 foreign envoys. “On the first day, they were coming with problems of their embassies, but within few days the main concern was about their nationals in the country.”

On November 11 he wrote to the MEA on behalf of all the diplomatic outposts in Delhi asking for an increase in the limit of withdrawal of cash from the bank accounts of the embassies.

“We don’t want special privileges because everybody is being affected by this. But, at least the embassy account should have certain flexibility in the amount of money that can be withdrawn,” said Castellanos. “For an embassy operation, we need at least the equivalent of $2,000”.

According to official sources, the MEA had written to the finance ministry last week following Castellanos’ request, but so far there has been no response.

On Thursday, the MEA spokesperson Vikas Swarup said that Department of Economic Affairs was made aware of the grievances, an inter-ministerial committee has been formed by the ministry of finance, chaired by an Additional Secretary-rank officer. “A senior Joint Secretary from the Ministry of External Affairs is also a member of that committee and we await their guidance, their advice and their recommendation which can then be shared with those various categories who have approached us,” he said.

In the absence of any immediate relief in the last week, Castellanos had plans to escalate their concerns to a higher level. “We are following up with notes to the prime minister and Ministry of Finance in the next couple of days,” he said, adding, “I am also trying the president’s office to convey this message to him”.

Castellanos was quick to clarify that foreign diplomats were not criticising the demonetisation policy by appealing for a relaxation in their withdrawal limits. “We can neither oppose it or support it, because this is an internal issue of India. But, we are appreciative of the measure of the fact that this will benefit foreign investment and will decrease trans border terrorism,” he said.

He categorised the problems that have been raised by various high commissions and embassies into three broad groups.

“The first issue is that of our nationals, some of whom have changed money one or two weeks prior to the measure. They go to the bank and are told that they don’t have a bank account. Others are told that they are foreigners and banks have to give priority to Indians. Their old notes are also not being uniformly accepted at entrance of historical monuments,” said Castellanos, who has lived in India for 11 years now.

Foreign tourists have been told that they can exchange money at the airport, but that is not an adequate solution. “How can tourists change their money to new Indian currency when they are leaving and then go to their own country.”

He suggested that the Indian government had to take special measures for foreign tourists, like setting up temporary ATMs in hotels or popular tourist spots like the Taj Mahal.

“We are concerned that Indian government has put immense effort to improve facilities for tourism… and I think that this can really hurt the tourism industry in the long run”.

The special category of tourists who have been especially hard-hit by the demonetisation are those who come to India for medical treatment.

“The second problem is of nationals who are here as medical tourists. India is a hub and people come here for treatment, especially from neighbouring countries like Afghanistan, Iraq and Iran. They come with the money and they cannot pay for the hotel bills. For some countries like Iran and Sudan, their people don’t have international credit cards due to sanctions,” said Castellanos.

Shaida Abdali, Afghanistan’s ambassador to India, also confirmed to The Wire that a large number of Afghans who had come to India for medical treatment had been adversely impacted due to the demonetisation measure. The situation is dire as the winter season usually witnesses a larger influx of medical tourists from Afghanistan.

“I had spoken the ministry of finance joint secretary and conveyed to him the need to find a resolution on humanitarian basis,” Abdali said.

The “third concern” is that the day-to-day operations of the foreign embassies are getting paralysed.

“The daily operations include everything, from paying staff to putting fuel in the car to supporting a doctor’s visit for a diplomat’s family member falling ill. Each embassy is like a small town. You have different people with different requirements. You have staff that are depending on the embassy as they don’t have accounts,” Castellanos said.

He suggested that the Indian government could set up a special window by State Bank of India or other banks at the MEA for diplomats.

Due to the current low limit prescribed in a withdrawal, most embassies had to send their employees on multiple ATM runs, which means queuing up for hours each time.

The diplomatic community in Delhi – one of the largest in the world – is rife with tales of how senior officials have had to spend the better part of each day at the bank or ATM and often return empty-handed.

There are also stories about some really unlucky ones. Just a day before the demonetisation announcement, a newly-arrived diplomat exchanged $50,00 for Indian currency to pay rent, buy furniture and for other expenses while settling down with his family. “Now, he has no money with him,” said a foreign ambassador.

Castellanos said it not just small embassies that are facing problems, but even the larger ones. The MEA spokesperson said that some diplomatics missions had raised concerns on how to exchange the large amount of consular fees.

There are also rumblings from the more angry voices within the diplomatic community that the limits on withdrawal from diplomatic bank accounts was a violation of the Vienna Convention, which stipulates that a host country cannot put restrictions on the money maintained by embassies.

Besides the issues of diplomatic mission, the inter-ministerial committee will also deliberate to find a solution for the problems faced by NRIs who are unable to return to India soon to exchange Indian currency.

Another dilemma that the committee will have to grapple is that of Indian currency available with money exchangers abroad. “This is quite interesting because we don’t have full convertibility.  But it shows the strength of the Indian rupee, that we have money changers association abroad which are ready to dispense Indian rupees.  So they have asked us the same question that what they would do with the stacks they have.  How do they convert those?” said Swarup.

This piece was updated to include the MEA spokesperson’s response.