For India's rural millions, demonetisation of high-value bank notes has resulted in hardship

Bank correspondent Mohammad Imran (second from left) inputs bank details of villagers on a mobile banking machine in Basendua village in Bulandshahr, in northern Uttar Pradesh state.
Bank correspondent Mohammad Imran (second from left) inputs bank details of villagers on a mobile banking machine in Basendua village in Bulandshahr, in northern Uttar Pradesh state. PHOTO: AFP

BULANDSHAHR, India (AFP) - Indian farmer Zakir Khan should be sowing his winter crops now. Instead he is stuck at home after the government's shock move to pull high-value notes out of circulation left him with no money to pay for seeds - or feed his family.

Like millions of rural Indians, Mr Khan lives far from a bank and relies almost entirely on cash to pay for food and the seeds and fertiliser he needs.

Most of his notes are now worthless unless he can switch them for new ones or deposit them with a rural bank - many of which are yet to receive the new cash.

India's government asked its citizens to put up with what it called the "short-term inconvenience" when it announced the move to withdraw 85 per cent of currency in circulation in a bid to tackle widespread tax evasion.

But for Mr Khan, left with just 80 rupees (S$1.68) in cash and with no more food in the house, it means a lot more than inconvenience.

"The government has robbed us," the 42-year-old said in his native village in Bulandshahr district in the impoverished northern state of Uttar Pradesh. "The government is saying these hardships are temporary, but if we are unable to sow our crops this month, we won't have anything to eat next year."

Huge queues have formed outside banks and ATMs in cities across India as people try to swap their old notes for new ones, while many are finding ways to carry out their daily transactions online.

In rural areas though, none of that is possible.

To add to farmers' woes, the prices of vegetables and other staples have plummeted as a lack of cash in circulation hits demand.

Traders at Delhi's main produce wholesale market Azadpur Mandi say business is down by as much as 50 per cent.

To try to ease the problems, the government this week announced it would boost a network of mobile ATMs in vans and public-sector bank representatives known in India as correspondents, who provide rural communities with access to bank services.

They are part of Prime Minister Narendra Modi's ambitious plan to bring banking to India's rural masses, where many still have no choice but to rely on private moneylenders who charge usurious interest.

But Mr Mohammad Imran, who works as a banking correspondent in a village of 4,000 people, said he had received barely any cash since the November 8 announcement.

"Mostly I take old currency notes from the villagers and deposit them in the bank. There is hardly any cash exchange," said Mr Imran, who had taken more than 2.5 million rupees in old notes to deposit, but only handed out 50,000 rupees in new currency.

"People are angry and often hurl abuse at me for not giving them cash. But I am as helpless as they are," he said, adding that he tried to prioritise the sick and needy.

Meanwhile, a worker at one government-owned rural bank said it still had no cash, 10 days after the announcement.

"This is simply a rash decision," he said on condition of anonymity.

The government says the move is aimed at bringing billions of rupees in unaccounted money into the formal banking system and will ultimately boost the economy.

That message has gone down well in rural areas, where resentment over tax evasion by the wealthy runs high, and many say they are prepared to put up with the resulting hardships.

Only six people earning over 500 million rupees filed tax returns in 2012-2013, the latest figures available, even though an estimated 2,100 Indians have a net worth that exceeds US$50 million (S$71.31 million).

"Corrupt people have amassed huge amounts and the poor are suffering as a result. We have to trust the government to bring about change," said Mr Mukesh Yadav, a villager in Uttar Pradesh.