RIYADH — Saudi money exchangers are going to lose millions of Saudi riyals because of the demonetization of Rs1,000 and Rs500 denomination notes by the Indian government.
An estimated Rs2 billion corresponding to roughly SR110 million is currently available with money exchangers in the Kingdom, according to Adel Al-Malatani, an owner of a recognized money exchange outlet in Makkah.
India is still reeling from Prime Minister Narendra Modi›s shock decision nearly three weeks ago to pull 86 percent of the currency from circulation overnight, triggering a chronic shortage of notes. Owners of the banned Rs500 (roughly SR28) and Rs1,000 (roughly SR55) notes have until the end of the year to deposit them in a bank, and can only directly exchange a small number for new currency.
Al-Malatani told a local Arabic daily that that there are more than 50 accredited money exchangers supported by the Saudi Arabian Monetary Agency (SAMA) in the Kingdom. “I have Rs8 million equivalent to SR400,000,” he said.
He pointed to the lack of intervention by SAMA to find a solution.
Earlier, the Interior Ministry issued a warning in this regard to the public through the Director General of the Department of Public Relations and Information Maj. Gen. Muhammad Al-Maroul.
“Money exchangers must hand over Indian currencies to banks and replace them with Rs100 denomination notes or less as of 09/02/1438 Hijri (Nov. 9, 2016),” the warning said.
Analysis from Deutsche Bank suggests that 80 percent of the Indian currency notes will return to the banking system, which will increase deposit growth by up to 10 percent.
Analysts say they expect about half of that to stay in the system long-term, which would increase pre-tax profits — especially at public sector banks that usually have bigger retail networks by up to 15 percent.
© The Saudi Gazette 2016