ANYBODY who has had to deposit dollars or other foreign currency purchased from the open market knows the absurd obstacles that stand in the way. Routinely, bank tellers will examine the currency bills, almost literally under the microscope, and refuse to accept those that have even a slight mark on them, no matter how minuscule. Moreover, they often refuse to accept older issued currency. One could be purchasing dollars for any reason — for remitting to a child studying abroad, or making a payment to a friend or sending to relatives outside the country — but this absurd ritual of locating clean currency bills is experienced by everyone. Recently, the State Bank issued instructions to all banks to show a little more generosity when applying standards of purity to incoming foreign currency bills, but it is doubtful that the lecture will have much effect. After all, the banks claim they have to check the notes to satisfy the State Bank, where all foreign currency bills have to ultimately be deposited.

So how do we get rid of this absurd exercise, which imposes myriad costs upon people in need of foreign exchange? This is not an idle question for the rich. The nuisance that the State Bank is trying to address actually points to deeper problems in our foreign currency markets. The periodic bursting of the spread between the kerb and interbank rate for the dollar is another example. This also grows out of a disarticulation of the forex markets that connect banks and exchange companies. The disputes between the latter two are no secret, and quite often the State Bank is forced to step in to mediate and settle their differences. But where spreads are concerned, there is at least some sort of a benchmark that one can peg the discussions on. In the matter of soiled and marked bills what can be done is to stress the importance of a little common sense. And sometimes that is a lot harder than any complicated policy exercise.

Published in Dawn, February 22nd, 2017