The fears of payday chaos began to come true on Wednesday. Queues at banks and ATMs became longer, cash ran out quicker, and banks sought police protection and put their own limits on withdrawals.
The government has put a cap of Rs 24,000 on what a person can take out in a week and all of it can be done in one go. However, on Wednesday banks in major cities were giving out no more than Rs 10,000 per person, and shrinking the amount to Rs. 4,000 at some branches.
Still, several bank branches ran out of cash within hours of opening on Wednesday morning. “Banks have already started seeing more crowd. Since old people are not familiar with net banking, they prefer coming to the branch,” said a bank official. This at a time when most banks are getting less than half the cash they need.
The results are inevitable in an economy where an overwhelming 78% of consumer payments are made in cash.
“Angry customers, who did not get cash, locked up bank staff at a few branches in Tamil Nadu, Uttar Pradesh and Bihar. The situation is getting out of hand. We have sought police protection,” said CH Venkatachalam, general secretary, All India Bank Employees’ Association.
The bulk of the salaries get credited to bank accounts. But most of them have a cash component. In the case of some, such as domestic help, the entire payment is in cash. And those who get salaries electronically usually line up at ATMs to withdraw money for expenses, such as school and medical fees, newspaper bills, and other sundry purchases.
So the good old Indian jugaad has come into play.
Sunita Srivastata, a 36-year-old housewife living in Lajpat Nagar, has offered to buy her maid groceries instead of paying the Rs 500 salary.
Companies have devised their own methods. Some are offering a day off to employees to queue up at the bank. Some, such as software giant Infosys, are deploying mini ATMs in offices. Many real estate and construction companies, a sector that employs many casual workers and pays the bulk of the salaries in cash, is helping their people open bank accounts.
“We spoke to our banking partners to open accounts for the labourers working on our construction site. We do not want to hold on to people’s salaries,” said Amit Modi, director at real estate developer, ABA Corp.
They have no alternative, because there just isn’t enough cash going around. The State Bank of India, which has the largest number of currency chests in Delhi, capped withdrawals at Rs 4,000 in some branches and at Rs 10,000 in some others.
An official with the bank said its Daryaganj branch received only Rs 10 lakh on Wednesday, down from Rs 30 lakh on each of the preceding three days. Several banks in Daryaganj ran out of cash within three hours.
“People get agitated because they cannot withdraw their own money,” said an ICICI bank branch manager in Mumbai. HT visited branches of HDFC Bank, ICICI Bank, Axis Bank, and Yes Bank in Mumbai’s Fort, Nariman Point, and Charni Road to find them limiting their daily cash withdrawal to Rs 4,000 per person on Wednesday.
Directed by the government, the Reserve Bank of India increased the printing of Rs. 500 notes by 25%. “The printing of Rs. 2,000 notes is over and the presses can now switch lines to the Rs. 500 note,” said a finance ministry official. The presses cannot print the two notes simultaneously. Still, said the official, it will take another three weeks to have enough Rs. 500 notes in banks and ATMs.
The RBI governor has assured finance minister Arun Jaitley that the situation was under control, said an official of the central bank, adding that Rs. 64,000 crore has been pumped into the system since November 21.
However, the biggest challenge the banks face a shortage of Rs. 500 and Rs. 100 notes.
(With inputs from Beena Parmar, Himani Chandna, and Vandana Ramnani)