Indian banks received 2 trillion rupees (US$29.6 billion) of cash after the government’s Nov. 8 surprise move to abolish high-denomination banknotes, as people queued for hours to deposit or exchange the old bills and automated teller machines (ATMs) ran dry.
With the banned bills accounting for 86 percent 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 Saturday, the Indian Ministry of Finance said in a statement.
Photo: AP
There is adequate money in the currency chests at more than 4,000 locations and reconfiguration of dispensing machines is to be completed within two weeks, Indian Minister of Finance Arun Jaitley said.
Lenders have been caught out by Indian Prime Minister Narendra Modi’s unexpected and widely praised announcement of the withdrawal of 500-rupee and 1,000-rupee notes, part of a crackdown on tax evasion and the underground economy.
Jaitley urged people not to rush to banks immediately, to 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 on Saturday at a news conference in New Delhi. “There are long, but orderly queues. Such a big currency replacement can’t be done overnight.”
The State Bank of India received deposits worth 478.68 billion rupees, Jaitley said.
It handled 543.70 billion rupees 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 percent to 25 percent of the nation’s banking system, he said.
The government deliberately did not reconfigure the nation’s more than 200,000 cash machines beforehand to help keep the announcement a secret, Jaitley said.
The machines are being recalibrated so that they can dispense new 500 and 2,000-rupee notes, which do not fit into the existing cash trays in the ATMs.
The central bank’s presses are printing banknotes at full capacity to ensure availability, the Reserve Bank of India 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 Modi’s 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 100-rupee notes are being disbursed from the machines, according to the finance ministry’s statement on Saturday. To overcome cash-flow problems, the government allowed the use of old banknotes to pay court fees and utility bills until today. 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,” Jaitley said. “There is no mismanagement at banks. Had that been the case, then not so many people would have been serviced.”
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