In the age of digital payments it feels strange to carry around wads of currency notes.
This is exactly what happened to me last week in Bhutan. For the entire duration of the trip that covered about 800km, from Paro to Thimpu, Punakha, Phobji Valley, Trongsa and onward to Bumthang and back, I was unable to use any of my credit or debit cards, let along e-payment apps like PayTM, GPay or Bhim-UPI. At all hotels and shops, my attention was drawn to the fine-print behind every card issued in India - "Not valid for payment in foreign exchange in Nepal and Bhutan".
The question is why would any Indian want to make a payment in foreign exchange? India and Bhutan share open borders, and Indian currency is freely accepted everywhere, but the use of anything other than cash is quite difficult. While it is possible to withdraw cash from the Bank of Bhutan (BoB) ATMs in the capital city, Thimphu, a steep fee of N300 is charged for each transaction.
How did this strange situation come to pass? How much of tourist income is Bhutan losing due to these rules?
Explanations available online point to apprehensions at the central banks that these steps are in place to prevent Hawala transactions and money laundering across the open borders...yet, things do not seem to add up.
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REFERENCES & LINKS
- Hawala transactions - https://www.imf.org/external/pubs/ft/fandd/2002/12/elqorchi.htm#:~:text=The%20hawala%20system%20refers%20to,transaction%20and%20the%20countries%20involved.
- RBI Rules - https://www.rbi.org.in/Scripts/FAQView.aspx?Id=66
- Hindi YT - https://youtu.be/zAdIYHdO7VU
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