Banks refuse to accept old-design US dollar notes

KARACHI: Millions of dollars stashed away in lockers by Pakistanis face the risk of devaluation as banks have stopped accepting old-design notes.

Meanwhile, moneychangers are charging up to a 4 per cent fee to exchange the old-design bills.

Pakistanis who do not know the difference between old- and new-design notes are going to be unsuspecting victims of devaluation and unacceptability of the dollars.

Banks and moneychangers confirmed on Tuesday that the former are not accepting the old-design notes while the latter are charging a fee to exchange them.

The old-design $100 notes are not banned anywhere in the world, except Pakistan where the strange situation seems to have emerged mainly due to the banks’ refusal to accept old-design banknotes.

The $100 bill with a blue stripe in middle of the note is newly designed. Older bills without the blue stripe are not currently acceptable by Pakistani banks.

There is no official restriction on accepting the old-design $100 note. But moneychangers say banks turn down old-design notes when they try to deposit them.

“There is no restriction on banks to accept or reject the US dollars. It all depends on banks how they deal with the currency,” said Abid Qamar, chief spokesman for the State Bank of Pakistan (SBP). He added that there is no need for the SBP to intervene in this affair.

Moneychangers who charge a 3-4pc fee for exchanging each $100 bill said it is because of the banks’ stance on old-design notes.

Both old- and new-design dollar bills are legal tender and remain acceptable in Dubai, the main destination for Pakistani currency exporters. According to moneychangers, new-design notes were introduced about five years back.

Traders prefer using cash to settle payments in order to avoid the tax on banking transactions. Many Pakistanis like to keep their savings in banks’ lockers in the form of dollars. Other victims of this trend are overseas Pakistanis who keep foreign exchange accounts in Pakistan.

“I withdrew $4,000 from my accounts, but moneychangers refused to accept it and told me that these are old notes and not acceptable. He was ready to accept the dollar at Rs103 while the market rate was Rs107.50 at that time,” said Mr Iqbal. He added that hundreds of thousands of Pakistanis living abroad are not aware of the so-called devaluation of the US currency in Pakistan.

Moneychangers buy old-design notes at a cheaper price and manage to exchange the same in Dubai without incurring any cost and thus make a heavy profit.

“We don’t know why banks are not accepting the old-design dollars, but it means devaluation for those who hold these notes. This is true that both banks and moneychangers are not accepting old-design notes,” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.

“The old-design dollars are not acceptable even in China and Russia. They also demand the new-design dollar,” he added. He said the bigger problem exists with the British pound.

“If we want to deposit 10,000 pounds, we have to keep 40,000, as banks are extremely cautious about the currency,” he said. He added that their biggest advantage is that they constitute an exportable foreign currency as opposed to dollars that can’t be exported.

Published in Dawn,January 25th, 2017