Naifaru Court has ordered the Bank of Maldives (BML)’s Naifaru Branch to issue an amount of dollars requested by the ‘Naifaru Juvenile’ NGO, after it sued the bank for declining to issue dollars because the NGO had deposited dollar cheques rather than physical cash.
Naifaru Court Judge Abdul Muhusin delivered the verdict yesterday and said that there was no legal grounds for the Bank of Maldives to withhold the money, and that all the dollars saved in the bank under Naifaru Juvenile’s name belonged to the NGO.
The judge also ruled that the bank had no authority to change the money into another currency when the owner requested it to be kept in the specific currency that the owner had deposited.
The money saved in Naifaru Juvenile’s account was money aid money from foreign parties to conduct different activities under agreements it had made, and if the money was not released, the foreign parties aiding the NGO might lose confidence in it, the judge said.
The judge also noted that its inability to draw on its funds could potentially lead to the NGO losing future agreements and aid from foreign parties.
BML and other banks in the Maldives are currently facing an ongoing major dollar shortage and have limited the amount of dollars they issue each day.
While the official exchange rate has been floated within 20 percent of the pegged rate of Rf12.85, it has sat for much of the year at the upper bracket of Rf15.42. The exchange rate on the black market is up to Rf20.
While dollars pour into the Maldives’ profitable tourism sector, much of this is swiftly banked overseas and little enters the local economy. The Maldives Monetary Authority (MMA) has never enforced regulations requiring use of the local currency and most tourism businesses continue to charge tourists in US dollars, greatly limiting demand for rufiya.
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This judgement leaves me perplexed. I am not a banker or economist but I perfectly understand the position of the banks. If you deposit a cheque on your bank account or receive a transfer from another bank, the bank is not encashing any physical cash. How can the bank pay you cash if it cannot obtain USD cash itself from the Central bank? This judgement will increase the chaos in the foreign currency shortage as banks may refuse to operate USD accounts if required to pay cash that they don't have!!!
Is USD a legal tender in Maldives?How can banks be obliged to pay cash USD when the Central Bank is not providing cash USD?
I have one USD bank account at BML and one USD current account at SBI. If I deposit a cheque from my SBI account to my BML account, this means I can withdraw USD cash easily at BML now!!!Very interesting...but this is so unrealistic...a judge should learn some basic Finance principles before making such a stupid statement in a court of law!!!
One key details that's missing here is the denomination of the NGO's account. If it was a USD account, then, BML has to provide USD. However, if the account was an MRf account, then BML will be under no obligation to provide USD!
The deposition of the cheque into an MRf account is a foreign exchange transaction with spot rates applied at the time!
Well, with half the story missing, we don't know whether the judge is guilty or not!
This is easy. The cheque would be written from the payer and if that party has a dollar account then it would be in dollars and BML should pay back in dollars.
it is also obvious that cheques can be written in dollars from a dollar account. There are two separate checks for dollar and ruffiyya account.
So if the cheque is being realised in dollars, then BML should pay back in dollars. If the cheque is not being realised then BML is within its rights to return the cheque saying insufficient funds in the dollar account of the payer.
it sometimes frustrates me that some of our readers are so brain washed by BML propaganda, they make no sense. In this day and age there is no need for physical cash to be put in. do u think huge multinationals trade in physical cash ? no, or even the reserve banks in the world transfer physical cash > no , then why on earth does a NGO in a small island HAVE TO deposit physical cash ? if demand for dollars cannot be met then close all USD accounts and remit out all remaining cash to customers m sure they can all go to other banks.... its your USD money not the banks, this is not the age or the place to pretend our basic human rights are a delicacy given by anyone
If BML do not have the capacity to operate everyday USD accounts then don't operate them. I live in a OECD country and I cannot open a everyday USD account because the banks here do not have enough liquid USD cash for that business.
The banks won't have enough MRF even if all their customers wanted to withdraw their MRF savings at the same time. They have carefully thought out levels of cash to meet everyday needs instead. They need the same machanism for USD and if carrying USD is a lot more expensive then charge a handling fee and make USD accounts unattractive.
I don't see how the bank can force the customer to buy MFR at the bank's own profit making rate.
I have a dollar account at BML and I know they cannot give me cash when I receive remittances from abroad.Why should they?I can effect payments by Swift and cheques on this account.Why cash?The problem we face here is no banks have sufficient dollar cash to supply the market.If MMA was supplying dollar cash to banks then we can request cash.Why banks have to pay dollar cash in Maldives when their central bank is not paying dollar cash?
If you live in a so advanced society why the hell do you need to withdraw cash?
This is another gimmic by the people who were in power, lost it through election and wants a comeback by hook or crook.
Cha ghaazee ah saabahey!
Central Bank should take responsibility for this. They have failed in implementing foreign exchange regulations as well as supplying dollars to Banks
Even if the cheque clearing cycle goes smoothly, if BML doesn't have an efficient distribution system for liquid cash among its branches, then we can expect more of these situations to surface as more NGOs are based outside the capital.The bottom line is, the kind of efficiency that NGOs expect cannot be achieved with the kind of day to day volumes of cash transactions reported in the outer atolls. Therefore, BMLs approach would not include a scheme in which willy-nilly withdrawals of lump sums of dollars are possible.
It is hardly a matter to sue over...
Most banks import and export foreign cash currency in developed countries and customers pay for depositing and withdrawing foreign currencies.Why does'nt MMA allow banks to import foreign currencies and charge those who need cash?
I rarely use cash foreign currency as I prefer the convenience of my debit and credit cards. I once saw a person withdrawing cash dollars at BML from his account and was very disgusted. The person was paid around 3000 usd in 1 notes!!!Is that customer service?Better not pay than pay like that!!!
My friends working in banks have told me that all banks must have a Reserve USD account with MMA.Thus according to this court judgement banks should also be allowed to withdraw USD cash from MMA!!!I am sure MMA is already working overtime on this issue. They will quickly find a solution to this problem and explain to the public and banks what they understand by the term "LEGAL TENDER"!!!
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation.Earlier this year MMA and the police were seeking to enforce a regulation that all payments in Maldives should be made in Rufiya and the public sector benefited and were happy to pay all their debts in local currency.How can a court of law now refuse the local currency as a medium of payment?MMA should intervene to protect the banking system and its regulations!!!If banks are provided with only Rufiya cash by the Central bank, they should be obliged to pay out only Rufiya cash.