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Indian diaspora caught out by surprise currency clampdown
[HONG KONG] India's shock move on Tuesday to withdraw large denomination bank notes from circulation to fight corruption and tax evasion has left some overseas citizens high and dry, as money changers in key Asian centres stopped accepting the currency.
In Hong Kong's Chungking Mansions, home to more than a dozen money changers and a key hub for Indian businesses and traders, the Indian rupee found no takers, with several currency dealers displaying "0.00" on their counters.
The bustling 17-storey building, made famous by Wong Kar-wai's 1994 movie "Chungking Express" depicting the seedy underbelly of Hong Kong, is popular with travellers looking for cheap accommodation and spicy Indian and African curries.
On Wednesday morning, more than the usual number of Indian customers turned up frantically looking to exchange their Indian bank notes, according to local money changers.
Gurpreet Kaur, a Hong Kong resident of Indian origin who was trying to convert about 50,000 Indian rupees (S$1,046), was disappointed after seven money changers refused to accept the 500 rupee bank notes she presented. "This is really frustrating and we had no time to act," she said, as she walked out of the dimly-lit building.
In a surprise move, India announced it was banning the circulation of 500 and 1,000 rupee notes.
The decision is designed to bring billions of dollars in unaccounted wealth into the mainstream economy and to tackle India's rampant corruption and counterfeit currency problems.
While the measure found broad support among economists in India, it left overseas residents and currency dealers alike confused.
One forex trader at Hong Kong-based money-changing chain Singapore Exchange Co said his firm was left with 10 million Indian rupees in cash. "We don't know what to do, we are frantically trying to find buyers and sell at any cost. But there are no takers yet," said one of the clerks, who gave his name only as Yunus.
The clerk said he had been inundated with phone calls since early on Wednesday from nervous customers left holding stashes of Indian bank notes.
It was a similar story in Singapore, another Asian financial centre with a sizeable Indian community, with people holding rupees and unable to exchange them into other currencies.
The two financial centres are home to around 400,000 residents of Indian origin, mostly engaged in diamond and textiles trading or working in the financial and construction industries.
India has strict rules on how much money a single resident can take overseas. The cap is 25,000 rupees per person.
While these limits imply overseas Indian residents have limited amounts of rupees in their hands, more money leaves India's boundaries through unofficial channels, including underground banks that rely on personal connections. "We're not trading the currency today. Usually no one comes to change rupees but today there are a lot of people coming to change it," an employee at Singapore-based City Money Changer said.