Crowds throng banks, anger mounts over government’s shock decision

The Reserve Bank of India yesterday urged savers to not hoard money as public anger mounted over the government’s shock decision to withdraw large denomination notes in an attempt to clean up the country’s black economy.
Thousands of people were again standing outside banks across the country trying to change Rs500 and Rs1,000 bills the government abolished on Tuesday, in an effort to crack down on corruption.
The banned rupee notes made up more than 80% of the currency in circulation, leaving millions without cash and threatening to bring much of the cash-driven economy to a halt.
As banks struggled to dispense money, the RBI said small denomination currency notes were available with both the central bank and with other lenders.
People “need not be anxious” and should not hoard bank notes because “cash is available when they need it,” the RBI said in a statement.
It also asked banks to provide details of cash withdrawn and exchanged daily, in contrast to fortnightly, to provide a better idea on circulation.
The measures came as people complained of lack of access to their accounts despite hours of waiting at banks as well as over the non-functioning of tens of thousands of ATMs not yet reconfigured for the new series of Rs2,000 bills.
The Times of India reported that the central bank’s office in Ahmedabad was handing out coins in return for the old notes because it didn’t have enough valid tender.
It showed a picture of a man emerging with plastic packets of coins of 10 rupees, underlining the banking system’s struggle to make the transition to the new series of notes.
Anil Dalavi, a 32-year-old Mumbai resident with Rs20 in his pocket who was waiting outside a bank, said he supported Prime Minister Narendra Modi’s efforts to go after people with ill-gotten wealth.
“It has been tough for middle class people like us because we were caught completely unaware. But since this is a good move to flush out black money, I am willing to bear the pain.”
The “black economy”, the term widely used to describe transactions that take place outside formal channels, could account for as much as 20% of gross domestic product, according to investment firm Ambit.
Modi’s political opponents said they would unite to fight the demonetisation move which had made lives difficult for millions of ordinary people.
“The government has spread anarchy in the country, the common man cannot buy daily products,” said Mulayam Singh Yadav, leader of the Samajwadi Party, as crowds formed outside banks in Lucknow, the capital of the country’s most populous state Uttar Pradesh.
Yadav demanded Modi withdraw the decision to cancel the bank notes.
Uttar Pradesh, which holds state elections early next year, sends the largest number of legislators to the parliament.
West Bengal Chief Minister Mamata Banerjee said the situation was “nothing short of an emergency” and pledged to unite opposition parties against the government’s decision.
“I have never seen such a thing. People have money in their accounts but can’t access it. They can’t pay for treatment of a family member in hospital, weddings have been put on hold, daily business has taken a beating,” she said.
The Indian Banks’ Association (IBA) has issued a statement saying Rs300bn of cash, including both lower denomination notes and Rs2,000 currency notes, were disbursed in the last three days.
The IBA also said ATMs are being recalibrated to handle the new series of Rs500 and Rs2,000 denomination currency notes.