The Bank Employees Federation of India (BEFI) said on Thursday the Reserve Bank of India (RBI) has put India’s banking system in utter chaos after the government demonetised Rs 500 and Rs 1,000 currency notes.
B Prasad, the president of Bihar chapter of the BEFI, told reporters that as a regulator it was the primary duty of the central bank to maintain cash supply to every bank across the country but it has been unable to do so.
“The RBI has completely failed as a regulator and in discharging its responsibility to make banks do hassle free business in a severe cash crunch situation,” Prasad said in Patna.
“The person responsible for this complete chaos should quit his job,” he said without specifying who he meant.
Prime Minister Narendra Modi scrapped Rs 500- and Rs 1,000-notes, which accounted for 86% of all cash in the economy, in a move to catch out Indians with black money, earned by corrupt means or evading taxes. But a bumpy rollout of the new currency has seen millions of people line up outside banks and ATMs, with small traders and farmers the worst hit.
Prasad alleged that bank chests are running out of cash and the RBI had to own up responsibility.
“The situation is worse in banks located in rural areas. There is an acute shortage of cash supply. Dirty, soiled and non-issuable notes are also being re-circulated,” he said.
“There are long queues of customers in front of banks in rural areas and they are being consoled with a maximum withdrawal of Rs 1,000 due to acute shortage of cash,” he added.
Prasad, however, denied he was demanding a withdrawal of the ban on high denomination notes. “What we are protesting is the manner in which the government and the RBI have made it operational,” he said.
“Bank employees are under extreme pressure for the last 14 days. They are facing the wrath of customers despite working continuously for more than 12 hours (10am to 11pm),” he said.
He also criticised the RBI’s guidelines for seeking withdrawal of Rs 2.5 lakh for marriage purpose. “The 32-point form to be filled up by the bride,groom and their parents, seeking withdrawal of cash, is untenable,” he said.
Prasad said demonetisation would hardly curb the flow of black money in the country.
“Black money consists of about 25% to 30% of the total economy of which 94% is invested in real estate, company shares, gold and other investments. Only 6% of the total black money is in the form of cash of which 1% or 2% can be caught,” he said.
He added that the cash crunch has hit the agriculture, construction and small business sectors hard.
Some experts have said that the demonetisation move has deeply damaged India’s mostly cash economy where online transactions are uncommon and hobbled by a lack of connectivity and poor network across the vast countryside.
The estimated cost of the move may top Rs 1 lakh crore, analysts have warned, with tens of thousands of workers in informal sectors already bearing the brunt of the cash crunch.
Moody’s Investors Service on Thursday warned the persistent cash crunch could worsen asset quality at Indian banks.