NEW DELHI • Bankers are bracing themselves for long hours and angry mobs as payday approaches in India, the first test for Prime Minister Narendra Modi's move to invalidate almost all cash in circulation.
"Already people who are frustrated are locking branches from outside in Uttar Pradesh, Bihar and Tamil Nadu and abusing staff as enough cash is not available," said Mr C. H. Venkatachalam, general secretary of the All India Bank Employees' Association.
The group has sought police protection at bank branches for the next 10 days, he added. "This is the fallout of one of the worst-planned and executed government decisions in decades."
He estimates that about 20 million people - almost twice the population of Greece - will queue up at bank branches and ATMs over the coming week, when most employers in India pay their staff. In an economy where 98 per cent of consumer payments are in cash, banks are functioning with about half the amount of currency they need.
"We are bracing ourselves for payday and fearing the worst," said Mr Parthasarathi Mukherjee, chief executive officer at Chennai-based Laxmi Vilas Bank.
"If we run out of cash, we will have to approach the Reserve Bank of India for more. It is tough."
The shortages follow Mr Modi's move on Nov 8 to ban 500-rupee and 1,000-rupee notes, a decision that blindsided the nation and sucked out 86 per cent of currency in circulation. Most top banks in the financial heart of Mumbai are now starting the day with anywhere between 800 million rupees (S$16.6 million) and 1.2 billion rupees in cash - instead of the typical 1.5 billion rupees, according to bank officials, who declined to be identified, citing the sensitivity of the subject.
These currency chests are then shared with several branches, which are rationing supplies. Withdrawals are capped at 10,000 rupees per person instead of the 24,000-rupee limit set by the government, said a manager at a state-run Bank of India branch in the eastern state of Jharkhand.
In a Mumbai suburb, a branch of the nation's largest lender, State Bank of India, was starting the day with about 600,000 rupees in cash that will run out in about an hour, compared with the 1.5 million it would typically have, the manager said. Staff will also have to work harder to document the payouts once business hours end, the official said.
Both managers asked not to be identified as they are not authorised to speak with the media.
"With payday around the corner, a lot of small and medium-sized companies are opting for prepaid cards over cash payments," said Mr Naveen Surya, managing director of payments solutions company Itz Cash Card, who is also chairman of the representative body Payments Council of India.
"More than five million of these cards have been sold in India in the last one week and sales of 40 million more are expected through December," he said.
Ride-sharing service Ola has partnered with fuel companies to help drivers get e-vouchers to fill up their tanks at Bharat Petroleum Corp pumps in Bengaluru, the company said in a statement.
Paytm, India's largest digital wallet start-up, has noticed a doubling in online recharges, including a trend where individuals top up multiple mobile phones to help friends and family, the company said in its statement.
The government too is encouraging electronic payments. Card payment facilities were introduced in Parliament's dining hall yesterday, the Press Trust of India reported.
While large companies such as Hindustan Petroleum Corp make 99 per cent of their payouts electronically, it still needs to work out a system for smaller sub-contractors, said finance director J. Ramaswamy.