India’s cash crisis – a tourist’s guide

When I thought about travelling to South India in December on a group tour, there were a few challenges I could foresee.  Would I get on with the group?  Would the heat and humidity be unbearable?  Would I manage to pack the right stuff?  Would I struggle with the long days of travelling and the discomfort of India’s trains and buses?

It never once occurred to me that the biggest challenge of all would be getting hold of money.

The cash flow crisis

On 8th November 2016, in a move that shocked the nation, India’s government declared that all 500 and 1,000 rupee notes were no longer legal tender, effective immediately.

It was attempt to crack down on corruption, forged banknotes, and black market cash.  Those who want to use their now-redundant banknotes have to pay them into a bank account, and anyone depositing large amounts will soon come under the beady eye of the law.

But it’s caused chaos in India.  There have been long queues at banks and cashpoints as people rush to exchange their old bills.  Many poorer people, and women, who don’t have bank accounts, have found their hard-won savings suddenly worthless.  And limits have been set on how much people can withdraw or exchange each day, causing a serious cash flow crisis.

And for tourists, it’s making travelling, and spending, extremely difficult.

Small traders like this street food seller are struggling with the cash flow crisis

Desperate for Dosh

I was dimly aware of the drama before setting off, but it didn’t occur to me that it might be an issue for me.  I don’t have any old 500 or 1000 rupee notes, and I’m not Indian, so why should I be affected?  It’s not generally possible to get rupees outside of India, so was armed with plenty of pounds sterling to exchange, and my credit and debit cards as an alternative source of funds.  ‘No problem!’  I thought.

But as soon as I arrived, it became apparent there might indeed be a problem.  Firstly, neither of the two ATMs in the airport would give me any cash.  Then the foreign exchange desk told me that I would only be able to change a maximum of £60, at an appalling rate of 76 rupees to the pound, plus commission of nearly 7.5%.  This meant that my £60 bought me Rs.4220, giving me just over 70 rupees to the pound.   Today’s current bank rate is around 83.  So my £60 cash was now worth about £50.

With a sigh, I took my rupees and headed to the hotel to meet my group.   But by the time I had paid for the taxi and dinner, and handed over local charges requested by the tour guide, I was already running low, so it was time to get some more money.

Cashpoint catastrophe

The guide directed us to an ATM.  Easy!  But there was a catch. Because of the restrictions, you can only take out Rs.2000 (about £24) in a single transaction. Tourists can make multiple transactions (locals are limited to just one a day) but at many cashpoints you are hit with a fee of Rs.200, on top of whatever charges your bank slaps on.  So if your card issuer charges a typical 2.5% transaction fee, on top of the ATM’s 10%, your £24 immediately becomes more like £21.

But the issue doesn’t end there.   When you leave the ATM, armed with your single, crisp, Rs.2000 note, the problem gets worse.  Because it’s virtually impossible to spend it. You want to buy a sandwich for Rs.180?  Curry and rice for Rs.350?  A fridge magnet for Rs.100?  Well tough, because, many traders won’t be able to give you change.  The restrictions on how much an individual can withdraw a day mean that small local traders like market stallholders and café owners are bitterly short of cash too, and often simply don’t have enough to give you change.   So all over India little deals are falling through, simply because of a lack of cash.

I tried to buy a souvenir costing Rs.250, using my Rs.2000 note.  The very friendly lady in the shop was naturally keen to make a sale, but she only had Rs.1500 change.  So either I had to accept what she could give me – thereby paying double for the item and cleaning her entirely out of change – or I had to walk away.  I walked away.

Later, I tried to get more rupees by taking some of my pounds sterling to a money exchange.  They had none.  I tried almost a dozen money changers in the surrounding streets, and not one was able to give me rupees.  So I ended up going back to the cashpoint again, and withdrawing another Rs.2000 note. I just hope I can spend it!

So what can you do?

1.  Get money at home. Despite what you may have been told, it IS possible to get rupees outside of India. Some foreign exchange places will let you have them, though the rate is terrible.   Today, it was possible to order rupees from Best Foreign Exchange at 70.25 to the pound.   Which is daylight robbery, but about the same as I got in the airport and at least (a) you’ll be able to get as much as you want and (b) you can get it in small notes.

2.  When you do get money, whether at home or in India, whatever you do make sure you ask for small bills. New 500 notes, or 100s where possible. You’ll be carrying around a brick load of cash, but at least you’ll be able to spend it.

3.  Don’t change money in the airport if you can help it.

4.  It isn’t always possible, but where you can, pay on a credit card.  But do make sure it’s not one that charges extortionate fees, and pay it off in full the minute you get home.

5.  When paying in cash, always try to break your big bills as soon as you can.  Even if you have the right small change, don’t use it unless you really have to.  Most larger restaurants and hotels will be able to break Rs.2000 bills if you say you don’t have small change, meaning you can save your small bills for the tuktuk drivers and market traders.

6.  Don’t leave it until the end of the week to try to change money – do it Monday – Thursday. Indians can only get out a restricted amount of money each day, so any change they have left on Friday must be made to last all weekend while the banks are closed – and they’ll be less likely to want to give it all to you.

7.  When you use an ATM, try to use one that doesn’t charge an extra fee.  South Indian Bank is one to avoid, but there are some that don’t charge, so try to find one of those.  And make sure you’re using a card that doesn’t slap on hefty fees either.   There’s loads of advice online about which cards are the best for foreign spending, so get one of those before you go. It’s bad enough being charged £2.40 a time to withdraw £24, so don’t make it worse with unnecessary card fees too.

Have you had trouble getting and spending cash in India?  Got any useful advice?  Comment below!

*** UPDATE***

From 1st January 2017, the government increased the amount you can now get from a cashpoint to RS.4000.  Which has helped ease the situation a little, but not by much.  So be prepared!

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