Millions of people thronged banks across India on Thursday to exchange high denomination currency notes after they were withdrawn by prime minister Narendra Modi's government.
The notes were demonetised on Tuesday in a move aimed at countering endemic corruption, money laundering, drug trafficking and terrorism.
Queues began forming on Thursday at about 6am, snaking their way around banks, hours before opening time in urban and rural India, to exchange 1,000 rupee and 500 rupee notes – worth €13.70 and €6.88 respectively – that ceased to be legal tender from midnight on Tuesday.
Banks erected dedicated counters to exchange the notes for 100 rupee ones, shipped to them by India’s Central Bank in fleets of trucks escorted by armoured cars. Many banks, however, ran short of the smaller notes by mid-afternoon.
Matters were exacerbated as individual cash withdrawal limits were capped at 4,000 rupees (€55), in a country where more than 80 per cent of all financial transactions are done in cash.
The federal government announced an extension of banking hours for several days, including Sunday, to cope with unprecedented crowds, as all ATMs remained offline for the second consecutive day.
The ATMs, however, were expected to go online on Friday, but will begin dispensing new 500 rupee and 2,000 rupee notes only by early December, federal finance minister Arun Jaitley said at a news conference.
“No need to rush, as banks will remain open until necessary,” Mr Jaitley assured the public, adding that though the demonetisation move would cause temporary inconvenience, it would benefit the economy in the long run.
Heaving bazaars
Shopping malls and normally heaving bazaars across New
Delhi
were deserted, while smaller neighbourhood grocery stores, roadside vegetable sellers and even teashops were empty, as few patrons had the correct currency on them.
“No one has any cash right now,” said Vijay Kumar, a shopkeeper in Delhi’s upmarket Niti Bagh area. But he sanguinely echoed the government’s line that this situation would soon right itself.
Many, however, with large stashes of discontinued currency notes attempted novel ways of trying to conserve their otherwise valueless money. It is legal tender only if traded through a bank before December 30th, but doing so has the potential to alert the tax authorities and invite heavy penalties.
Some bought multiple luxury railway and airline tickets to far off destinations with the demonitised currency – a provision permitted until the weekend – only to cancel them hours later and pocket the reimbursement.
Others acquired gold, diamonds, jewellery and foreign currency on the black market at a 30-40 per cent premiums, while entrepreneurial traders offered to buy back the demonetised notes at a reduced price.
Alcohol stores in northern Punjab state conducted brisk business by accepting the currency in return for only premium liquor, as did stores selling luxury goods.
There were also reports from Uttar Pradesh state, adjoining Delhi, of the police recovering partially burnt sacks of 500 rupee and 1,000 rupee notes yesterday.
Mr Modi’s move in is in line with of an election promise he made in 2014 to contain unaccounted for money – known as “black money” – that was equal in value to, if not more than, India’s official economy.
