Mumbai/New Delhi: India’s cash crisis stretched into its third day as ATMs ran dry and people stood for hours in long lines to exchange their now-defunct notes, while a government official said the shortages will continue into December.
India’s banks have been caught out by Prime Minister Narendra Modi’s unexpected and widely-praised announcement late on Tuesday of the withdrawal of Rs500 and Rs1,000 notes, part of a crackdown on tax evasion and the underground economy. The now-worthless notes account for 86% of money in circulation, leaving many Indians with little or no cash.
Printing of a new Rs2,000 note is ongoing, but work has only just begun on the replacement Rs500 notes, said an official in the finance ministry, who asked not to be identified because the official isn’t authorized to speak to the media. Banknote shortages are likely to continue into next month, the official added. Finance ministry spokesman D.S. Malik didn’t respond to calls seeking comments.
Armed soldiers and security officers were deployed outside banks to manage the growing crowds, who so far have waited patiently to exchange their currency. Banks are restricting withdrawals to Rs4,000 per person, adding to the cash shortages.
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Pushpendra Pankaj, a worker at New Delhi’s municipal council, said he had been waiting for one and a half hours at the Canara Bank branch near Parliament House to exchange his old Rs500 notes. He said he had been told that the bank server had crashed, but was prepared to stay in line as he needed money for household expenses.
“It’s a good move by the government to curb black money, but it is full of hassles for common people like us,” said Pankaj.
Compounding the problem is the need to reconfigure the country’s 220,000 cash machines so that they can dispense the new Rs500 and Rs2,000 notes, which do not fit into the existing cash trays in the ATMs, according to Navroze Dastur, the managing director for India and South Asia at NCR Corp., which supplies about two-thirds of the country’s ATMs. Dastur said it will take “some time” to adjust all the ATMs. Until then, the machines can only dispense low-denomination Rs100 notes, which are increasingly in short supply.
The long queues outside India’s banks are a sign that the government was ill-equipped to deal with such a huge transition, said Manoj Joshi, a fellow with the New Delhi-based Observer Research Foundation. “The whole exercise is premised on the fact that you’ll be able to implement it quickly and effectively. Governments in India simply don’t have that ability.” The central bank in a statement on Friday said banks have enough cash though it may take lenders time to revamp the ATMs.
Political rivals of Modi’s Bharatiya Janata Party were relaying images of the chaos on social media. The opposition Congress party tweeted photos of its party workers bringing chai (tea) to ordinary people standing in line, while the Bahujan Samaj Party—which is hoping to beat the BJP in upcoming Uttar Pradesh state elections—was tweeting news reports on the long lines outside ATMs.
Axis Bank Ltd., the country’s third-largest private lender, said it was working on refilling its 13,000 ATMs with after they started to run out of cash soon after being loaded up on Wednesday.
“Yesterday, banks ran short of cash around noon, Joshi said. “And we’re only talking about Delhi. God alone knows what’s happening in other parts of the country.”
Also in line outside Canara Bank in New Delhi was Fkrudeen Khan, who said he was waiting to withdraw money because he had only Rs25 in his pocket.
“The limit of Rs4,000 set by the government is very little,” Khan said. “It should be higher than this. There is no money lying at home and I have to get some notes at any cost.”
Siddhartha Singh and Pratik Parija also contributed to this story. Bloomberg