Post-Partition: India still owes Pakistan a little over Rs5.6b, says State Bank

Published: July 16, 2014
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Division of assets and liabilities of Reserve Bank of India post-1947 remains incomplete to this day.  PHOTO: FILE

Division of assets and liabilities of Reserve Bank of India post-1947 remains incomplete to this day. PHOTO: FILE

KARACHI: When it comes to Pakistan-India relations, it’s not just the territorial disputes that refuse to fade away even after 67 years of the Partition.

The division of assets and liabilities of the Reserve Bank of India (RBI) post-1947 remains incomplete to this day. According to the State Bank of Pakistan (SBP), India still owes it a little over Rs5.6 billion – mainly on account of assets held with the RBI “pending transfer to Pakistan”.

In other words, the country’s central monetary authority believes India has yet to cough up money equivalent to the present-day value of the assets that RBI had refused to surrender to the government of Pakistan, although the latter was entitled to receive them post-Partition.

From the first-ever Statement of Affairs that the SBP issued on its second day of existence – July 2, 1948 – to the latest one released on June 27, 2014, the central bank has listed the unsettled claims on the RBI among its “assets” unfailingly for the last 66 years.

The SBP’s issue department – which deals with currency and the assets that underlie it – shows the outstanding claims on the RBI under two distinct categories of assets.

The bigger chunk, comprising gold coins worth Rs4.1 billion, sterling securities amounting to Rs501.6 million, government of India securities worth Rs240.4 million and Rs4.9 million of rupee coins, appears as assets held with the RBI pending transfer to Pakistan. The smaller chunk consists of “India notes representing assets receivable from the RBI”.

While the first set of so-called assets is self-explanatory, the second claim on the RBI needs detailed explanation.

As per the agreement between political leaderships of the two sides, the RBI was to remain the central monetary authority for both India and Pakistan post-Partition, with Indian notes to stay on as legal tender in Pakistan until September 30, 1948.

According to the first annual report of the SBP for 1948-49, the two governments mutually agreed to end the RBI’s status of the common monetary authority from July 1, 1948, as Pakistan became “exposed to grave dangers” without the right to control its currency and banking.

As for the Indian notes and coins present in currency chests in Pakistan on June 30, 1948, and the ones encashed during the next fiscal year, Pakistan was supposed to return these to the RBI. Subsequently, the SBP was to claim equivalent assets against these Indian notes and coins from the Reserve Bank of India.

According to historian S Aijaz Husain, total assets that the government of Pakistan was entitled to receive from the RBI amounted to Rs1.7 billion. However, the SBP received assets worth only Rs1.2 billion.

The difference between the claims and the actual amount surrendered by the RBI was Rs490.8 million. Out of this amount, “India notes representing assets receivable from the RBI” accounted for Rs430.2 million while assets “held with the RBI pending transfer to Pakistan” equalled Rs59 million.

This means that original, unsettled claims of Rs490.8 million have now ballooned to over Rs5.6 billion after adjusting for inflation, exchange rate revisions and appreciation of underlying securities during the last six and a half decades.

That Pakistan will ever be able to arm-twist its eastern neighbour into paying its claims seems impossible, at least in the foreseeable future. So why doesn’t the SBP simply write off the unsettled claims and rid its Statement of Affairs of “assets” that practically don’t exist?

In the post-gold standard era, the liabilities in the form of Pakistan’s currency, currently in excess of Rs2.3 trillion, are largely backed by government securities. That’s why the assets in the form of unsettled claims on the RBI equal less than 0.25% of the SBP-issued notes in circulation.

The SBP spokesperson shied away from commenting on the issue. But several former central bankers The Express Tribune spoke to believe such a decision can only be taken by the country’s political leadership.

Doing away with assets, which owe their doubtful existence on the central bank’s books to decades-old animosity with India, is likely to generate a backlash at home. With hyper-nationalist analysts frothing at their mouths on 24/7 news channels, any resolution of outstanding claims on the RBI appears improbable for now.

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Reader Comments (70)

  • jewish hitler
    Jul 16, 2014 - 1:01PM

    hahaha once again the begging starts.

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  • ZH
    Jul 16, 2014 - 1:01PM

    First try to collect taxes from the fellow Pakistanis who have been defaulting it………

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  • maddy
    Jul 16, 2014 - 1:08PM

    Yeah, give us our money so that our leaders can transfer those to their swiss accounts.

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  • H.A. Khan
    Jul 16, 2014 - 1:12PM

    Is State Bank of Pakistan serious that they can recover this amount?
    SBP ever heard about “Bad debt”

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  • Pity
    Jul 16, 2014 - 1:13PM

    India wants to become economic power but the fact remains that it failed to pay Pakistan its due share of funds at the time of independence. India should not brag when its economy is standing funds usurped from other countries.

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  • az
    Jul 16, 2014 - 1:16PM

    Pakistan should claim this from Indian Government officially and involve UNO if required.

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  • BlackJack
    Jul 16, 2014 - 1:23PM

    That Pakistan of 1947 no longer exists. The majority of Pakistanis formed a new country in 1971 and India spent billions in housing their refugees and in liberating them from ongoing genocide. My advice is to forget the past if it contains only bitter memories.

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  • Landa_Bazar_Don
    Jul 16, 2014 - 1:30PM

    Pakistan owes India over Rs.68.4 billion as war reparations for starting every single war since independence. India will be generous enough to let Pak pay the balance after deducting Rs.5.6 billion.

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  • lunacyassailam
    Jul 16, 2014 - 1:31PM

    The low castes owe India the whole of Sindh.

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  • Pity
    Jul 16, 2014 - 1:37PM

    @jewish hitler:
    It is proved that Indian economy stands on funds usurped from Pakistan, so sad….

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  • String theory.
    Jul 16, 2014 - 1:42PM

    INdia , China and Russia has made new IMF to break the supremacy of US dollar , That is really great news in world, We need to go close in Indian camp and should try to borrow money from BRICS, INdian China nad Russian made IMF

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  • salman
    Jul 16, 2014 - 1:42PM

    India – our defaulter and land grabber.

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  • Abdul
    Jul 16, 2014 - 1:48PM

    @Pity: So sue us.

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  • Senman
    Jul 16, 2014 - 1:50PM

    I hope the Indian government also sends the bill to Pakistan with regards to their (proven) non-state actors destructing assets in India.

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  • AVM Polpot
    Jul 16, 2014 - 2:01PM

    So where is the typo?
    ++++++++++++++
    US also oswes Pakistan 70 Bn USD for the War on Terror…..

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  • chandran
    Jul 16, 2014 - 2:04PM

    That Pakistan of 1947 no longer exists. The majority of Pakistanis formed a new country in 1971

    This statement show the reality, dont worry we have to strenghten our SAARC forum inorder
    to have SAARC budget and that will happen soon I think so.

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  • @Desi
    Jul 16, 2014 - 2:13PM

    Pakisan still owes India complete “Jammu and Kashmir”

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  • San
    Jul 16, 2014 - 2:14PM

    Don’t give anything to pakistanis. They came from desert , go back to desert

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  • Pakistani
    Jul 16, 2014 - 2:20PM

    ET and its Indian agenda.. My God….

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  • Rana Ajeet
    Jul 16, 2014 - 2:24PM

    “The division of assets and liabilities of the Reserve Bank of India (RBI) post-1947 remains incomplete to this day” I would like Indian Govt. to give Pakistan Rs5.6 billion but partition still not complete till Muslims live in India.So to complete the partition of 1947 and to your justify the two nation theory , pl take back the remaining Muslims from India

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  • Arsalan Janjua
    Jul 16, 2014 - 2:25PM

    Shouldnt a large part of this 5.6 Billion go to Bangladesh ?

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  • Indian
    Jul 16, 2014 - 2:30PM

    Even if India decides to pay, the question still remains, whom should it pay? Because Pakistan of 1947 doesn’t exists anymore.

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  • Don slayer.
    Jul 16, 2014 - 2:31PM

    @LandaBazarDon:
    We wouldnt owe you anything if you hadnt; occupied our Kashmir and interfered in our domestic issues.

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  • Don slayer.
    Jul 16, 2014 - 2:33PM

    @Senman:
    yes and then we can reciprocate with bills from Indian adventures in East Pakistan, Baluchistan and occupied Pakistani Kashmir.

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  • Jul 16, 2014 - 2:39PM

    India owes Pak a lot more than that.

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  • Indian
    Jul 16, 2014 - 3:02PM

    @ Rana Ajeet
    I am proud that India retained its secular credentials. Nations formed for group of people on religious basis are always unstable. Why do you want to turn India into Pakistan and repeat the horror of partition. People like you are great danger to humanity wherever they live. I hope India always remain secular democratic country with motto of unity in diversity,

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  • Gurion
    Jul 16, 2014 - 3:07PM

    Come and get them.
    Molon labe!

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  • Waleed Khan
    Jul 16, 2014 - 3:25PM

    @Don slayer.: you mean our Kashmir. What about those princely estates in Gujarat that chose to be with pakistan but then you Indians annexed it on the principle that it is Hindu majority. Same thing we did with 40% of Kashmir

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  • junaid
    Jul 16, 2014 - 3:27PM

    We must have a martial law like musharraf and patriotic technocratic govt which will give 10 percent gdp growth per year for atleat 10 years and then we will be on equal footing with china forget india as balochistan has gas gold etc and we shall then get kashmir by hook or by crook

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  • East View
    Jul 16, 2014 - 3:39PM

    Well Level this amount as the Pakistan Occupied Kashmir’s Rent – The Occupied Areas Rent are now settled, kindly take this as a Notice period and free our Lands – The Entire Kashmir is a Part of India –

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  • Malveros
    Jul 16, 2014 - 3:52PM

    Gandhi tried to get this money back for Pakistan but he was assassinated for it. India is an annexer and usurper. They have taken our rivers and now are building dams on our rivers. Unfortunately the last decisive war will be over water.

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  • Roshan
    Jul 16, 2014 - 4:07PM

    @East View:
    What if some kashmiris of PoK want to live with Pakistan, will Pakistan give them refuge?

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  • Jul 16, 2014 - 4:12PM

    In 2009 same statement come from RBI of India
    That Pakistan owe India money

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  • Roshan
    Jul 16, 2014 - 4:15PM

    @junaid:
    Last you tried to claim Kashmir you lost Bangladesh. This time you may lose your gas gold mine Balochistan. All your rivers are drying up as Afghanistan and India are makig dams after dams on rivers that flow into Pakistan. Indira Gandhi Canal from river sutlej is pushing the deert into pakistan while Indian Thar has become green, check from google map. Pakistan now really looks ike a part of arab desert land. To sum up, just think pragmatically before you jump to any conclusions.

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  • Skhan
    Jul 16, 2014 - 4:15PM

    what about what Pakistan owes to Bangladesh?

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  • Razi
    Jul 16, 2014 - 4:46PM

    As expected, this news item too hijacked by the bigoted and prejudiced Indians who can never see any fault in India vis-a-vis Pakistan.

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  • a_writer
    Jul 16, 2014 - 5:15PM

    If this story involved any other two neighboring nations on this planet, it would have brought a smile of amusement among the citizens of both countries or, if it is a serious enough claim, both countries would have worked it out amicably.

    Alas, it will not be case between India and Pakistan. The only thing Pakistan can take to the bank is a guarantee that they will never see one Rupee of this money. Between these two countries, whatever is the demand from one, it is an opportunity for the other to derive perverse pleasure in denying it; be it the ownership of Kashmir, or Siachen or water or the demand action against Hafiz Saeed or closing down of terror camps. It doesn’t matter – the mutual attitude is: ‘You want it? Oohoo! here is my opportunity to say no and cause you heartburn and give me pleasure”.

    About the only probable next chapter for this news is for some Pakistani politician to use this to score points against the opposition, whip up some mob frenzy leading to death and destruction of public and/or minority properties and lives.

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  • Talking Point
    Jul 16, 2014 - 5:43PM

    @Pity: As your name implies , that is exactly how I feel about you. BRICS own New Bank was launched yesterday with a USD 18 billion structured contribution from India ( besides contributions from other participating nations) and there is not a single news item in any Pak news outlet and yet you rant about this due . Has Pakistan ever claimed this amount or did Pak wake up from this Rip Van Winkle slumber only today ?

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  • orinosman
    Jul 16, 2014 - 5:46PM

    Do you any idea how much money Pakistan owes to Bangladesh at the time of 1971?

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  • Vectra
    Jul 16, 2014 - 5:49PM

    Pakistan still owes India Rs 300 Crore ($30 Million) as pre-partition debt without interest being calculated.India has cleared its share of the pre-partition debt of Rs 50 crore soon after independence in 1947.

    Source : http://timesofindia.indiatimes.com/india/Pakistan-still-owes-India-Rs-300-crore-as-pre-partition-debt/articleshow/4745392.cms (2009 report)

    Pakistan give back India’s money and then demand from India.BTW the Rs 5.6b you mentioned as of 1947 also includes Bangladesh so first bring Bangladesh back to 1947 state and then demand.You better give India’s money which is not in dispute but your money is in dispute between Pakistan and Bangladesh,first solve that and then demand but until then please return India’s $30 Million along with interest unto 2014.Recommend

  • Spock
    Jul 16, 2014 - 5:49PM

    India gave that money to Bangladesh. Take it from them.

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  • Moiz Omar
    Jul 16, 2014 - 6:06PM

    @@Desi:
    Only in your dreams.

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  • Anon
    Jul 16, 2014 - 6:34PM

    So asking for money owed to Pakistan is now “hyper-nationalism”… of course!

    Surely Pakistan and India can sort out a suitable payment plan, or take the issue to a court… “Shining India” should be more than able to pay off what it owes… You know, as a gesture of goodwill and burying the hatchet and whatnot.

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  • Ali Imran
    Jul 16, 2014 - 6:38PM

    Pakistan was entitled to receive from the RBI amounted to Rs1.7 billion. However, the SBP received assets worth only Rs1.2 billion.—-That means India has returned 1.2B out of 1.7B, Rest they might have assumed false claim :-) ….but good part is, they have returned larger portion, give some credit for that.

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  • Moiz Omar
    Jul 16, 2014 - 7:15PM

    @East View:
    All of Kashmir is your land only in your dreams.

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  • vinsin
    Jul 16, 2014 - 8:02PM

    @Waleed Khan:
    Junagad has no boundary touching with Pakistan. Junagad area was less than what pakistan hold in kashmir.

    @Indian:
    India is not secular. Its laws are based on religion. India is a religious/pluralistic state. Where Rana said India should be formed on religious basis?

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  • Naresh
    Jul 16, 2014 - 8:57PM

    Please refer to the following Article :
    .
    Pakistan still owes India Rs 300 crore as pre-partition debt
    .
    http://timesofindia.indiatimes.com/india/Pakistan-still-owes-India-Rs-300-crore-as-pre-partition-debt/articleshow/4745392.cms

    NEW DELHI: Pakistan is yet to clear a pre-partition debt of Rs 300 crore to India, which has been carrying forward year after year in its Budget account as a “liability”.
    .
    However, India has cleared its share of the pre-partition debt of Rs 50 crore soon after independence in 1947.
    .
    CheersRecommend

  • Naresh
    Jul 16, 2014 - 9:07PM

    @Talking Point:
    @Vectra:
    .
    Si,r India cleared the about of 50 Crores soon after Independence – I believe Mahatma Gandhi INSISTED upon it.
    .
    Pakistan however still owes India 300 Crores and the sum owed at a reasonable rate of Interest on a compounded basis would now approach Billion US$!
    .
    Cheers

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  • idonotagree
    Jul 16, 2014 - 9:10PM

    Clearly a cheap shot by Tribune timed at the announcement of the BRICS bank and emergency reserve to counter World Bank and IMF. How long will the Pakistan media and politician keep fooling their people. Looks like you want to tell to the world that India has taken Pakistan money and started this Bank. Very cheap.

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  • SB
    Jul 16, 2014 - 9:29PM

    Fictitious Accounts!!!

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  • Someone
    Jul 17, 2014 - 12:54AM

    India is a corrupt country monetarily and morally. Pakistan cannot have high expectations from this volatile neighbour. Before owing anything else, India owes Pakistan’s illegally occupied Jammu and Kashmir province back to Pakistan.

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  • Farook Marker
    Jul 17, 2014 - 6:17AM

    @Pity

    By the same token, India should also file the huge claims which Pakistani has never settled but has been promising to do so since decades. Also, could we talk about the huge assets (worth billions at the prevalent pre-partition value but worth much more today) which were simply usurped by Pakistanis of all colours (particularly politicians, streetside thugs conniving with mullahs and others). Don’t open up a can of worms for yourselves, Pakistani brethren. Incidentally, this is a non-story and it is surprising that this otherwise serious paper is publishing a report based on conjecture. .

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  • IndianDude
    Jul 17, 2014 - 6:27AM

    According to my calculation, pakistan owes india $100 billion dollars for lodging & feeding (daal chawal/roti values in ’71 adjusted for inflation in year 2014 + interest for last 43 years.) expense of 95,000+ brave army jawans for 2 years after ’71 war.

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  • Sultan Alvi
    Jul 17, 2014 - 6:44AM

    India will give ten times what is owed to Pakistan from 1947 partition on one condition.
    India will ship 150 million Muslims left behind in India.
    Let us know when can we transfer money and people?

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  • Kolsat
    Jul 17, 2014 - 7:30AM

    @Pity: and what about reparations for Pakistani attacks on India since 1947?

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  • Narendra Modi
    Jul 17, 2014 - 8:18AM

    The check is in the mail…

    Signed

    N. Modi

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  • Mirza
    Jul 17, 2014 - 8:56AM

    What has Pakistan given to Bangladesh? If there is any money due at India they must give it to Bangladesh which was 56% Pakistan.

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  • globalobserver
    Jul 17, 2014 - 10:07AM

    Wow! This proves that Pakistan is really broke! The Establishment must be really desperate to get their hands on any free money.

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  • Fahad
    Jul 17, 2014 - 11:28AM

    @Don slayer.

    Its so easy for you to ask for Kashmir and forget how you invaded and captured Hyderabad Daccan and Junnah Garh on the same basis ! but well when ever have you guys talked rationally !

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  • Jul 17, 2014 - 12:00PM

    This amount is merely ~3.4B INR. India give more than 3-5B per year as grant and aid. Earlier India gave 1B USD. that is ~98B PKR To Bangladesh. 5-6B to Afghanistan per year. 40-60B to Bhutan per year.
    If Pakistan become friendly then we will give much more than this, Including Railway engines, Medicines, Electricity and countless other things.

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  • vinsin
    Jul 17, 2014 - 12:50PM

    @Fahad:
    What are you talking abour? Hyderabad king signed the instrument of accession and blamed razaks for the delay.

    Junagadh is part of Pakistan according to laws of instrument of accession followed by Muslim league but is part of India according to laws of instrument of accession followed by Congress and British. Even by your own logic Pakistan cannot hold more than 8,643 sq km but pakistan holds much more area than that.
    You also forget that Indian muslims who voted and created Pakistan never move to Pakistan.
    Sardar Patel gave full Kashmir to Pakistan but liaquat Ali Khan refused, so why Pakistan has sudden so much interest? You also forget than Kashmir valley is the private property of the King as it was purchased.

    ET pls publish.

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  • Tony Singh
    Jul 17, 2014 - 1:49PM

    Some points come to mind.
    1. RBI was central monetary authority for India and Pakistan till 1st.july 1948 and Indian currency was circulation in Pakistan as legal tender. At the time of return of monies, why did not Pakistan claim the deficit? By any legal law even a civil case has to be filed within 3years. Did Pakistan govt. do that?
    2. What about the assets our forefathers left in Pakistan during partition? Does Pakistan govt. have any plans to compensate for those?

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  • Masroor
    Jul 17, 2014 - 2:56PM

    @Talking Point:
    Sure I read it in DAWN yesterday.

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  • raw is war
    Jul 17, 2014 - 3:37PM

    India released 97,000 POWs in 1971. You can adjust it as the payment for that.

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  • Kunal
    Jul 17, 2014 - 4:09PM

    http://timesofindia.indiatimes.com/india/Pakistan-still-owes-India-Rs-300-crore-as-pre-partition-debt/articleshow/4745392.cms

    NEW DELHI: Pakistan is yet to clear a pre-partition debt of Rs 300 crore to India, which has been carrying forward year after year in its Budget account as a “liability”.

    The Budget books refer to this Rs 300 crore as “amount due from Pakistan on account of share of pre-partition debt.”

    The amount was entered as a liability in the first Budget of independent India in 1950-51 and has been there ever since.

    But this a measly amount compared to the union government’s total liabilities that total Rs 34,95,452 crore and accounts for just 0.008 per cent of the total liabilities.

    However, in 1950-51 this amount accounted for more than 10 per cent of India’s total liabilities of Rs 2,865.40 crore and nearly 10 times of India’s total external debt of Rs 32 crore.

    Surprisingly, New Delhi has not added interest to this amount since its entry in the books.

    However, India has cleared its share of the pre-partition debt of Rs 50 crore soon after independence in 1947.

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  • lol
    Jul 18, 2014 - 1:55AM

    Ek sikka bhi nahin milega tereko pakistan….lol…:) just Kidding

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  • Jul 18, 2014 - 7:09AM

    [email protected]:
    Pakistan owes India Rs.200 billion for Bangladesh war expenses plus undisclosed amount it costs for 10 million East Pakistani refugees that poured in India in 1971.

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  • TheAgeless
    Jul 18, 2014 - 2:08PM

    @Pity: In a 1.87 trillion dollar economy, which India is, 5 billion is just a little more than the round off error.

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  • Roshan
    Jul 18, 2014 - 6:48PM

    @TheAgeless: it is 5.6 billion pakistani rupees an not dollars, in USD the amount is about 56 million as against 1.87 trillion USD.
    This is indeed a hillarious reporting by ET.

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  • Naresh
    Jul 19, 2014 - 9:04PM

    @Pity: India wants to become economic power but the fact remains that it failed to pay Pakistan its due share of funds at the time of independence. India should not brag when its economy is standing funds usurped from other countries.
    .
    Realy!!!
    .
    http://www.sbp.org.pk/ecodata/Invest_pk.pdf
    .
    International Investment Position of Pakistan Jul 16 2014 : US$ (74,209) Million
    Assets – US$ 18,994 Million Liabilities – US$ 93,203 Million.
    .
    In Other Words Pakistan ows Various International Bodies US$ 74.209 BILLION!
    .
    * includes the unsettled claims on India On 31-03-3014 = “–” I. E. NIL
    .
    It is Pakistan that owes INR 300 Crores in 1947 Money to India!
    .
    Nice Try.
    .
    Cheers

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