This travel season has been excellent. Yet for the forex dealer at the corner of your shopping plaza, suddenly, things don’t look very bright.
While competition has always been welcome, of late a number of casual entrants – equally casual about complying with RBI rules – have been pouring into the system. In a bid to keep pace with the casual newbees, some of the seasoned players have jumped the gun – compromising their time-tested checks and balances – and created a fine mess for themselves. As is often the case, as a knee-jerk reaction the entire industry is now being penalised for the oversight of a few. In effect, we are staring at a sort of blanket prohibition of forex products in the eye of the storm.
Banks have been at the vanguard of penalizing Forex companies; even ahead of RBI. Understandably so, since much of their business depends on a squeaky clean reputation. A number of products, especially the cashless ones such as forex cards are being systematically withdrawn en masse, without any consideration for the reputation and/or intent of well-heeled Forex companies that have been as squeaky clean in their dealings as the banks. While it does not augur well for the forex industry, I believe there’s an even bigger picture that the bankers are missing – the reversal of the forex traders from cashless to cash heavy.
The point is moot. When we began in the winter of 2013, WorldOne Forex had a turnover of about 40 million USD. In FY 2017-18 we’ve hit 200 million USD. Goes without saying that with the government heavily investing in a cashless economy, this 5-fold growth has been almost entirely driven by cashless products such as travel money cards/ multi currency cards.
Now with banks tapping the breaks on cashless forex products, the forex traders will simply have to go back to hard foreign currency notes – certainly not the way forward for an economy that has seen growth catapulted on ‘cashless’ wings.
Clearly, the solution does not lie in ‘prohibition’. There is need for better security and stringent measures; something within the domain of RBI. The Bankers of India have it within them to handle this maturely, rather than resort to withdrawal of cashless products; something that can only be described as an ‘Own Goal’.