Hundi or money carrier system is prevalent as informal procedure of remittance sending in most of the cases. Hundi refers to the illegal money exchange not supported by the international or national legal structure. The exchange rate offered by the hundi operators is 1-2% higher than the official exchange rate. They do not charge anything for transaction. It is the fastest method of transaction. In urgent situations this is the quickest method for sending money. The hundi operators provide door to door services. It was interesting to note that there are other social reasons for sending remittance through hundi. Few mentioned they send money to wives, fathers or brothers separately and preferred to keep the amounts sent secret, as it creates tension among the family members. Hundi provides the opportunity to maintain such confidentiality.
A number of reasons have been attached to the growth of Hundi market. These
include:
1. Financing smuggling of various items, including gold;
2. Existing tax regime leading to under- invoicing of imports;
3. Unholy alliance between officials of
financial institutions and hundi elements;
4. Financing recruitment charges of the recruiters;
5. Difference between official and unofficial exchange rates;
6. Quality and
speed of service;
7. Ability to reach clients both in destination countries and in the source countries.