By Bappaditya Chatterjee 

Kolkata, Nov 20 (IANS): Demonetisation of high-value notes has led to an over 50 per cent downslide in the average overall forex sales following a sharp crunch of foreign currencies in the market, money changers said.

Across cities, stores and offices of money changers have remained shut over the past few days as they have a "dearth of cash funds to buy foreign currencies" and "not enough cash to pay buyers of Indian currencies".

People wishing to travel abroad are at their wits' end over buying foreign currencies. In fact, money changers, who have become "risk averse" to a large extent in volatile market conditions, are trading conservatively.

As one dealer explained, "on an average 60-65 percent of the total transactions are cash driven" and in some cases, cash transactions could be "about 75-80 percent".

According to the money changers, major forex dealers have almost completely halted bulk deals between them and other dealers.

"We conducted a survey of about 15 money changers to gauge the market sentiment. We found overall sales of foreign exchange have reduced by 50-75 percent on an average," Abdul Hadi Shaikh, CEO of Fxkart.com, an online aggregator of authorised foreign exchange dealers, told IANS.

"Full-fledged money changers (FFMCs), who are relatively small forex license holders, are not buying foreign currencies from larger license holders like authorised dealers category II (AD IIs). Confirmed requests for foreign exchange from travel agents are getting abruptly cancelled," he added.

Money changers are now hard put to run their daily operations with the cap in weekly withdrawals from banks, though the government has now increased the limit from Rs 20,000 to Rs 24,000.

"Purchase of foreign currencies has been completely stopped and as a result, there is a crunch in supply of foreign currencies. The supply (of foreign currencies) has slumped by more than 30 percent. It is becoming a huge problem affecting travel plans of international passengers.

"We don't have adequate cash to buy foreign currencies. Since cash withdrawal is limited to Rs 24, 000 a week, we are not able to cater to buyers of Indian currencies as well as sellers of rupees. For business of money changing, cash is an important component," Bhaskar Rao, Executive Director of Bangalore-based Orient Exchange, told IANS.

"Walk-in retail foreign exchange transactions happening now are purely need-based and transactions are of bare minimum volume. Corporate demand is also negligible. Only urgent and must-to-travel-deals are coming through," Harendra Chaudhuri, head of Delhi- based Zenith Forex, told IANS.

He echoed Rao, saying money changers were unable to procure foreign currencies from banks due to either the rush at the banks or because they are not in a position to buy from forex markets due to the shortage of cash.

There have not been any changes in the RBI guidelines with respect to the buying and selling of forex against rupees in cash.

According to the guidelines, foreign exchange for travel abroad can be purchased from an authorised person against rupee payment in cash below Rs.50,000.

However, if the sale of foreign exchange is for an amount equivalent to Rs 50,000 and above, the entire payment should be made by way of a crossed cheque/banker's cheque or pay order or, demand draft or debit card or credit card or prepaid card only.

Beside the cash shortfall, exchange rates are on the upside. Before the demonetisation, the rate was about Rs 66-67 to a dollar. Now people need to pay over Rs 70 for a dollar.

"Rates of foreign currency notes are on a very higher side. In some markets, the US dollar is selling at a premium of 3-5 percent over the inter-bank benchmark rates (IBR)," Shaikh said.

Because of certain volatility, money changers have been reluctant to trade in the market to avert risk of revenue loss and so are keeping their stores closed. The RBI is also getting stricter about exchanges against physical rupee currency.

"The RBI and enforcement agencies are keeping a strict vigil on us to thwart any attempts by people to exchange demonetised Rs 500 and Rs 1,000 notes against dollars and take the money out of the country. Enforcement agencies keep a strict watch.

"With the crackdown against black money, the RBI has become strict in terms of how the currencies are being exchanged and is seeking daily reports," Shaikh said.

Moreover, foreign exchange dealers do not enjoy any exemption for accepting the demonetisied notes. Thus roadside shops that used to have cash business are the worst sufferers, Chaudhuri said.

"The plight of relatives of persons who are working abroad, particularly in the Gulf countries, is pathetic. Workers used to make remittances through the money transfer scheme. Now, we are not able to pay cash to relatives of those who work abroad. This segment is hard hit," Rao added.