Customers, Businesses Feel Their Way Through The Currency Crunch
Consumers and businesses are facing a short term cash crunch as availability of new notes remains thin
Two days after the government abruptly announced that currency notes of Rs 500 and Rs 1,000 would be scrapped, banks started to exchange old currency notes and dispense the new currency in small amounts.
Bank branches, which opened on Thursday after a day’s break, saw customers gather outside to try and deposit their old currency notes and draw fresh currency. Social media was littered with reports and pictures of queues at venues where an exchange of notes is allowed. BloombergQuint’s own reporters found that people were gathered at a number of branches across New Delhi and Mumbai.
Staggered Release Of Fresh Currency
Bank customers that BloombergQuint spoke to commented on the inconvenience caused by the shortage of cash, but at the same time saw merit in the government’s move.
The government decision to scrap Rs 500 and Rs 1,000 currency notes was announced on Tuesday. Banks remained shut on Wednesday to recalibrate branches and ATMs. Starting today, bank branches are being allowed to dispense small amounts of cash.
At bank branches, you can withdraw cash against a withdrawal slip or a cheque subject to a ceiling of Rs 10,000 per day and an overall limit of Rs 20,000 in a week. These limits will be reviewed after November 24. Once ATMs open starting tomorrow, you can withdraw a maximum of Rs 2,000 per card per day up to November 18.
Moving new currency notes into banks and taking out old currency notes is expected to be a mammoth task. Given the enormity of the challenge in moving cash around quickly, it is not surprising that not all banks are adequately stocked.
No Uniformity Across Banks
Farshid Fatakia from Mumbai said he had to go to three branches before he could exchange his old currency notes. At a branch of Catholic Syrian Bank in Mumbai’s Vasai area, Fatakia was turned back as the branch had not received new currency notes. A branch of Shamrao Vithal Bank in the same area declined a request for cash since Fatakia did not have an account there.
Fatakia finally managed to get his cash exchanged at ICICI Bank.
“I finally managed to get my notes exchanged but not before facing the high-handed behaviour of the employees. Firstly, the exchange form was not given in its original form. Customers were asked to get it photocopied from any other shop. They also refused to photocopy the PAN card at the bank itself and asked customers to fend for themselves. The entire ordeal lasted a good 90-100 minutes. A waste of time and resources.”
A senior banker at a mid-sized bank acknowledged that while they have received some cash, the quantum is not large enough to meet all needs. We are working with the RBI and currency chests to manage client needs, said this banker while requesting anonymity.
Businesses Look For Ways Around Cash Shortages
Business that have large cash operations are also feeling the pinch while others who work largely on electronic payments said that its business as usual for them.
Issac George, chief financial officer of GVK Power and Infrastructure Ltd said that it’s a “herculean task” for them, even as he acknowledged the long-term benefits of the government’s scheme.
Like others, we have our own share of pain. There is a restriction on cash withdrawals and ATM withdrawals. With just Rs 20,000 rupees a week how can businesses run? I don’t understand.Issac George, Chief Financial Officer, GVK Power & Infrastructure
GVK, which runs toll roads, had approached the National Highway Authority of India (NHAI) suggesting that toll collections be suspended for two days, which NHAI has accepted.
“I am sure some solution will come out. There are smart people sitting in the government. But without change, we can't operate on toll plazas. Banks were also shut. But I'm sure going forward, solution will come out,” said George.
On the flip side, Kevin Dsa, chief financial officer at Bajaj Auto, said that their business saw no impact since all their payments are done electronically and they do not deal in cash.
Kamal Khetan, chairman of Sunteck Realty, also claimed that all payments to contractors and others are made directly into bank accounts rather than in cash. As such, construction is not getting affected, he said.
Some pain for businesses is inevitable atleast for the next month or so. Tuesday’s decision to scrap Rs 500 and Rs 1000 notes has meant that 86 percent of the currency in circulation by value has been withdrawn.
Government Making Some Allowances
On its part, the government has made some concessions to ease the burden on citizens. Economic Affairs Secretary Shaktikanta Das said that old notes would be accepted at central and state government bodies.