India: After effects of demonetisation of high value currency notes

Hundreds of Indian banks reopened on 10 November and are finding it difficult to tackle the huge crowd that has queued up to exchange the defunct currency notes. The banks and ATMs were shut for a day to stock up the new currency denominations after Prime Minister Narendra Modi’s government withdrew the 500 and 1,000 rupee bank notes earlier this week.

Over the next couple of days, millions of Indian banking staff will have a tough job tackling irritated and anxious customers waiting in snaking queues to exchange their demonetised currency notes. Banks across the country have reopened on Thursday (10 November) after they were shut for a day in order to prepare for the influx of customers following the governments pulling of Rs 500 and Rs 1,000 currency notes.

Massive queues are building up outside financial institutions across the country to collect the newly introduced Rs 2,000 (£24) and Rs 500 denominations. While cash machines remain shut for the second consecutive day, households and small businesses are desperate for cash.

Security has been beefed up outside banks to deal with the situation.

Prime Minister Narendra Modi had announced the devaluation of the countrys high value notes on Tuesday (8 November) to curb the increasing menace of counterfeit currency, corruption and money laundering.

I had run out of cash yesterday (Wednesday) itself and was not prepared for the governments announcement at all. Im now waiting outside this bank for an hour now to get at least Rs 2,000. It seems many of my friends have spent more than two hours in the queue outside other banks in New Delhi and Mumbai, Arun Kumar, a customer waiting outside a bank in Bengaluru, told the IBTimes UK.

The government and central bank have repeatedly appealed to the public for calm assuring people that things will return to normal soon.

Banks have been asked to operate this weekend to ramp up transactions. The withdrawal of the Rs 500 and Rs 1,000 notes — which jointly account for more than 86% of the cash in circulation — is seen as one of the biggest financial crackdowns in recent years as there is a thriving parallel economy that is entirely cash-based in the country.

Those individuals who have large undisclosed amounts will have to face the consequences, said Finance Minister Arun Jaitley at a press conference. Those who make legitimate deposits would face no harassment, he added.

Meanwhile, a case challenging the governments abrupt step has been filed in the Supreme Court, which will be taken up for hearing on 15 November.