Panic in India as ATMs run dry for third day in battle on corruption
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 would continue into December.
India's banks have been caught out by Prime Minister Narendra Modi's unexpected and widely-praised announcement on Tuesday of the withdrawal of 500-rupee (€7) and 1,000-rupee notes, part of a crackdown on tax evasion and the underground economy.
The now-worthless notes account for 86pc of money in circulation, leaving many Indians with little or no cash.
Printing of a new 2,000- rupee note is ongoing, but work has only just begun on the replacement 500 notes, said an official in the Finance Ministry. Banknote shortages are likely to continue into next month, the official added.
Armed soldiers and security officers were deployed outside banks to manage the growing crowds, who have waited patiently to exchange their currency. Banks are restricting withdrawals to 4,000 rupees per person, adding to the cash shortages.
Pushpendra Pankaj, a worker at New Delhi's Municipal Council, said he had been waiting 90 minutes at the Canara Bank branch near Parliament House to exchange his old 500-rupee 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 Mr Pankaj.
Compounding the problem is the need to reconfigure the country's 220,000 cash machines so that they can dispense the new 500 and 2,000-rupee 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, which supplies about two-thirds of the country's ATMs. Dastur said it would take "some time" to adjust all the ATMs.
Until then, the machines can dispense only low-denomination 100-rupee 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 said yesterday that banks had enough cash, though it may take lenders time to revamp the ATMs.
Political rivals of Modi's Bharatiya Janata Party (BJP) were relaying images of the chaos on social media. The opposition Congress party tweeted photos of its party workers bringing tea to people standing in queues, while the Bahujan Samaj Party - which is hoping to beat the BJP in upcoming state elections - was tweeting news reports on the long lines outside ATMs.
Axis Bank Ltd, India's third-largest private lender, said it was working on refilling its 13,000 ATMs after they started to run out of cash soon after being loaded up on Wednesday.
"Yesterday, banks ran short of cash around noon," Mr Joshi said. "And we're only talking about Delhi. God alone knows what's happening in other parts of the country."