NICOSIA (AFP) - Anxious Cypriots queued outside Popular Bank ATM machines on March 21 to withdraw their cash as fears rose that the country's banking meltdown will mean its second largest bank closes for ever.

"It's all about cash now. Only a gambler will take cheques in this situation," said retired government official Phaedon Vassiliades as he withdrew money from the bank's ATM at Nicosia's Ledra Street tourist hot spot.

Behind the wheelchair-bound Vassiliades, a queue of anxious men and women waited to claw back as much as they can, while tourists took pictures on mobile phones and cameras.

"There are rumours that Laiki Bank (the Greek name for the Popular Bank) will never open again. I want to take out as much as I can," Mr Vassiliades, who lost his legs in a car accident, told AFP.

"I have nearly 60,000 euros (S$97,000) as savings in this bank and some credit societies. I don't know if I will ever get it back now. This is what I had and now it seems it is all gone."

Similar queues of worried Popular Bank depositors formed across central Nicosia, with some using more than one ATM card to withdraw whatever they could, often annoying those behind them.

Depositors spoke to AFP of panic after reports that the government, struggling to halt a banking meltdown since a European Union bailout package was first announced, was considering merging Popular Bank with the Bank of Cyprus.

The latter is the island's largest bank.

On March 21, politicians agreed to set up an investment fund as part of a Plan B aimed at securing a bailout deal with eurozone lenders, while also ruling out a tax on bank deposits that torpedoed an earlier deal.

But Popular Bank customers said they did not trust the government efforts.

"Cyprus is sinking. They (the EU and the international community) are prepared to let Cyprus sink," said Briton Gautam Kapoor, an employee of a Greek metals company, as he waited outside a Popular Bank ATM in central Nicosia.

"The markets have already factored in the Cyprus debacle. Nobody is going to have trust in Cyprus again. I just want to withdraw cash as much as possible as even fuel stations and departmental stores are now accepting only cash."

The manageress of a nearby fuel station confirmed that only ready money mattered now. "I am helpless. I have to pay cash to my fuel supplier so I'm accepting only cash," Ms Photoulla Zantis told AFP.

Several people queueing for money were distraught, especially at Popular Bank's prospects.

"I have lost nearly a million euros... my entire savings," said retired teacher Takis Photiades at one of the bank's ATMs in Nicosia.

"These bankers have let us down for years now. I invested in the bank's bond issue a few years ago and that too is of no value."

Behind him an angry crowd argued about what will happen next.

"We are doomed. Our sunny days are over," said insurance company employee Neophytos Constantinides.

"The EU has let us down. It is time to get Russia again and teach a lesson to the EU," shouted one angry man who refused to speak to AFP.

Finance Minister Michalis Sarris was embarking on a second day of talks in Moscow on March 21 on possible aid.

Russians including wealthy tycoons hold between a third and half of all Cypriot deposits and are believed to have more than US$30 billion (S$37.5 billion) in private and corporate cash in the Mediterranean island's banks.

"Laiki Bank will be the first one to go down as it has a lot of Russian money and the EU wants to hit Russia. We are caught between the two," said another depositor who asked not to be identified.