IMF backs India’s currency moves to check corruption, black money

The International Monetary fund (IMF) on Thursday hailed India's efforts to fight corruption through currency controls even as it stressed that the demonetisation measures announced on Tuesday should not disrupt people's lives and the normal functioning of the economy. 

''We support the measures to fight corruption and illicit financial flows in India. Of course, given the large role of cash in everyday transaction in India's economy the currency transition would have to be managed prudently to minimise possible disruption," IMF spokesman Gerry Rice told reporters at a news conference.

He was commenting on the Indian government's decision to withdraw Rs500 and Rs1,000 currency notes from circulation.

"I am just saying that when countries make these kinds of move, which is not exceptional - countries do this quite often - the transition needs to be managed very well," Rice said in response to another question.

Life in the country went on as normal despite some hiccups with the swapping of notes at banks and acceptance of old notes at select places.

Banks had a harrying time dealing with long queues of people wanting to get old notes exchanged for new ones and cash withdrawals at counters. Several banks also ran out of cash in the process.

ATMs started working on Friday, two days after Prime Minister Narendra Modi announced the Rs500 and Rs1,000 notes would no longer be legal tender in what he said, a surgical strike on black money.

Despite the cash shortage, the US dollar gained 52 paise to 67-rupee level at the Interbank Foreign Exchange market today. The dollar was trading at 67.15 in early trade after the American currency soared overseas.

Besides, foreign fund outflows and strong demand from importers, a lower opening of the domestic equity markets also weighed on the rupee, forex dealers said.