Indian PM Modi promises to ease cash crunch

Customers queue outside a bank near a shuttered ATM as they wait to try to exchange 500 and 1000 rupee notes and deposit money in Siliguri, India on Nov 13, 2016.
Customers queue outside a bank near a shuttered ATM as they wait to try to exchange 500 and 1000 rupee notes and deposit money in Siliguri, India on Nov 13, 2016. PHOTO: AFP

NEW DELHI  (AFP) – Prime Minister Narendra Modi on Monday (Nov 14) urged Indians to give him more time to resolve a cash crunch that followed the withdrawal of high-value banknotes from circulation, as rival politicians lashed out at his handling of the crisis.

His comments came as the government said it was increasing a weekly cash withdrawal limit and taking steps to help people in remote areas access money as frustration mounted.

There have been huge queues outside banks and ATMs ever since they reopened last Thursday, two days after Modi announced that 500 (S$10.44) and 1,000 rupee notes would no longer be legal tender in a bid to tackle corruption and tax evasion.

Indians rely heavily on cash for their daily transactions and those living in rural areas or who do not have bank accounts have been particularly hard hit.

Modi said he had been “pained” by the hardships people were facing, but insisted the move would ultimately benefit poor Indians in the long run.

“I am aware you are facing difficulties... I understand the inconvenience,” he said at a political rally in Uttar Pradesh, India’s most populous state, which goes to the polls next year.

“I am really pained by the inconvenience and that is why I am working tirelessly to help people overcome this situation.

“I will never let anyone loot money that belongs to India’s poor.” 

But opposition parties lashed out at Modi’s currency recall with several political parties teaming up to corner the government in the parliament’s winter session, which begins on Wednesday.

“Modi is saying give me 50 days to deal with the crises. But who created the crises?” Randeep Surjewala, main opposition Congress party spokesman said.

Opposition leaders have accused the government of throwing millions of common people in financial distress as the government failed to put adequate measures in place.

“(The) rich are sleeping in peace and only poor people are on roads to exchange their notes,” Kumari Mayawati, former chief minister of Uttar Pradesh state said.

She termed the decision anti-poor and anti-farmer, saying it has hit the common man “very hard”.

Two leading bank unions also criticised the note ban saying it has led to “financial chaos” and the decision was taken “without proper planning or preparation”.

Banks remained open over the weekend to try to ease the crunch, but were closed on Monday due to a public holiday with many ATMs across the country running out of cash.

The government has said it will take time for the machines to be recalibrated to accept the new notes, adding to the general frustration.

On Monday, Shaktikanta Das, India’s secretary for economic affairs, said the government would increase a weekly withdrawal limit of 20,000 to 24,000 rupees.

It will also allow a network of so-called banking correspondents, who travel to rural areas to provide people with access to banking services, to carry more cash.

The government has said the old notes can temporarily be used for essential services such as medical assistance.

They can be exchanged for new ones or deposited in a bank account until December 30, but long queues and a lack of cash has hampered that process.

Modi pledged to crack down on so-called black money – vast piles of wealth kept hidden from the tax authorities – when he came to power in 2014.

Analysts have broadly welcomed the latest initiative, but said consumer spending would likely dip in the short term as the new notes made their way into circulation.