Mumbai: Indian banks received Rs2 trillion ($29.8 billion) of cash after the government’s November 8 surprise move to abolish high-denomination banknotes, as customers queued for hours to deposit or exchange the old bills and ATMs ran dry.
With the banned bills accounting for 86 per cent of money out of circulation, there is tremendous pressure on the nation’s banking system to replenish the cash. More than 70 million transactions were recorded through midday on November 12, the Ministry of Finance said in a statement late on Saturday. There’s adequate money in the currency chests at more than 4,000 locations and re-configuration of dispensing machines will be completed within two weeks, Finance Minister Arun Jaitley said.
Lenders have been caught out by Prime Minister Narendra Modi’s unexpected and widely-praised announcement of the withdrawal of Rs500 and Rs1,000 notes, part of a crackdown on tax evasion and the underground economy. Jaitley urged people not to rush to banks immediately and wait for a few days and to conduct financial transactions using electronic transfers, checks and credit and debit cards.
“A big regret is that people are getting inconvenienced, but currency replacement of this magnitude will cause some problems,” Jaitley said at a press conference in New Delhi on Saturday. “There are long, but orderly queues. Such a big currency replacement can’t be done overnight.”
The government will take more steps to curb tax evasion, including action against benami property, Modi said at an event in Goa on Sunday. Benami is property actually owned by someone but held in the name of a third party.
State Bank of India (SBI), the country’s largest, got deposits worth Rs478.68 billion, Jaitley said. It handled Rs543.70 billion of cash transactions in all, including deposits, withdrawals and exchange of banknotes, starting Thursday through 12:15pm on Saturday, Jaitley said. The government-owned lender and its associates account for about 20 per cent to 25 per cent of the nation’s banking system, he said.
The government deliberately didn’t reconfigure the more than 200,000 cash machines beforehand to help keep the announcement a secret, Jaitley said. The machines are being re-calibrated so that they can dispense new Rs500 and Rs2,000 notes, which do not fit into the existing cash trays in the ATMs.
The Reserve Bank of India (RBI) on Sunday urged the public not to be anxious and avoid going to banks repeatedly to draw and hoard cash.
“The Reserve Bank assures members of the public that enough cash in small denominations is also available at the Reserve Bank and banks,” the central bank said in its statement. “Cash is available when they need it.” The RBI’s presses are printing banknotes at full capacity to ensure availability, it said on Saturday.
The cash crisis has seen people standing for hours in long lines to exchange the now-defunct notes, and political rivals of Bharatiya Janata Party relaying images of the chaos on social media.
About 120,000 out of the 200,000 ATMs are operational, and presently only Rs100 notes are being disbursed from the machines, according to the finance ministry’s statement on Saturday. To overcome cash-flow problems people are facing, the government allowed the use of old banknotes to pay court fees and utility bills until November 14. It had earlier also suspended collection of tolls on national highways through the same period.
“The first few days are going to be a period of inconvenience, but long-term advantages of this are to the overall economy,” said Jaitley. “There is no mismanagement at banks. Had that been the case then not so many people would have been serviced.”