RMA circulation and economic rights
A recent notice from Royal Monetary Authority (RMA) the national financial institutions regulator, reads that Bhutanese citizens are not permitted to open back account out of the country. Though the RMA did mention it was just a notice of reminder, it came as a result of increasing trend among Bhutanese to open bank account in India.
At present, Bhutanese banks have not been able to offer more than 6 per cent interest in fixed deposit principle while Indian banks offer over 9.55 per cent when a customer opts for fixed deposit of three years. While Bhutanese banks fail to provide service on daily balanced, Indian banks offer over 4.5 per cent on daily balances.
Additionally, Bhutanese riches feel more secure to have money in Indian banks on grounds that possibility of their failure is minimum and this is opposite in case of Bhutanese banks.
Bhutanese government must feel its responsibility to offer this benefits to Bhutanese clients to stop them from opening bank accounts in other countries. If applied forcefully, Bhutan is curtailing the economic rights of citizens enshrined in Bhutanese constitution. The policy contradicts with the policy of open economy. It remains up to the citizens to decide, intellectually, to keep money within their country but making it compulsory through legal means is confronting.
Bhutan will face other problems with such restriction. India is major trading partner of Bhutan. All transactions are made in Indian currency. Bhutan always has negative balance in trade with India for which more Indian currencies are required. As such, Bhutan buys huge amount from Indian banks for trading and other payments like interests. Bhutan paid Nu 2 million a day (in average) interest to India in August. Trade volume goes far beyond that. Annually, at the newly revised lending rate of Indian banks, Bhutan will pay some Nu 835 million as interest.
Thus, if all Bhutanese traders are to buy Indian rupee every time they demand goods from India is collateral loss for Bhutan. Opening accounts for these traders in India will not only give better interest but also greater advantage not to seek government support for payments they make for trading.
Of course, if all merchants start draining money to Indian banks, Bhutanese financial market will run out of liquidity. A balance is necessary to let the traders open accounts in foreign countries where they do businesses and not allowing all monies drain out of country. It’s a matter of awareness than a legal restriction. This is Asian value – not matter how RMA acts, it cannot come so heavily against those high officials and politicians who have accounts outside Bhutan.