Prime Minister Narendra Modi's demonetisation decision has struck at the roots of hawala trade with business coming to a grinding halt, Mail Today has found.

Dozens of agents in old Delhi - a hub of the money-laundering network - have shut shop in the absence of customers and cash after the Centre last month suddenly banned Rs 500 and Rs 1,000 notes in a bid to curb corruption and promote digital payments. The worst-hit hawala operators in the Capital are the Gujarati businessmen.

"They used to celebrate Diwali by shutting their offices and going back to their home state for 15-20 days," said Rakesh, whose father runs a courier services centre in old Delhi.

"But they have not returned since then because at the time they were supposed to come back, the scrapping of notes was announced."

Investigation agencies say the underground networks are trying to revive themselves by parking their black money in new currency in neighbouring countries. Officials say they have tightened vigil along border areas, especially near Bangladesh.

For a fee, a hawala dealer will provide the foreign currency equivalent of any amount and transfer it anywhere in the world - bypassing normal banking channels and leaving no paper trail.

Terrorists, drug dealers, arms salesmen and other criminals are big users of the network. Almost every city in India has hawala traders, but major transactions take place in Delhi, Mumbai and Gujarat.

Speaking to Mail Today, hawala operators in India, Pakistan and Dubai echoed the same words that the business has taken a massive hit with only about 3-5 per cent of the trade functioning.

"For the time being we have shut down our business and are staying back in Gujarat," said one of the agents whose office is in old Delhi. Sources say large volumes of cash lying with these brokers have turned redundant and many traders are likely to go bankrupt.

LIQUIDITY CRUNCH

This reporter approached the operator as a client, asking for Rs 20 lakh in old currency to be sent to Mumbai. But the hawala dealer refused to change the scrapped notes. When asked if Rs 20 lakh in new currency can be transferred to Mumbai, the operator turned that down as well, saying only Rs 4 to 5 lakh can be transferred.

"The liquidity of the new currency is very less so the operator sitting on the other side might not have the same amount as the client is willing to send," said another hawala dealer.

"But to survive, we are relying on the conversion of black money using agents and giving them 10 per cent commission."

A broker who was ready to send hawala money from Delhi to Dubai said that he is taking extra commission for old currency transactions.

The trading is based on trust, has no records or paper trail and legal enforcement, is fast, flexible, non-bureaucratic, and charges low commission rate, but is illegal. There is never any physical transfer of money and the channel is always anonymous. The money enters the system in local currency and leaves as a foreign currency.

"If 1 lakh Dirham has to be received in Dubai then Rs 21.5 lakh (in old currency) can be deposited in Delhi or Rs 19.25 lakh in new currency," he said.