India’s 50-day deadline for its citizens to deposit discontinued banknotes has come to an end but Indians continue to face a cash crunch owing to problems in getting new currency notes.
In a surprise move on November 8, Narendra Modi, India’s prime minister, announced that 500 and 1,000 rupee notes would be scrapped.
The ban on 500 and 1,000 rupee banknotes rendered 86 percent of the currency void.
It pushed millions of Indians, who ordinarily operate in a cash economy, to the periphery.
Indians were given until December 30 to swap their old 500-rupee ($7.30) and 1,000-rupee ($14.70) banknotes for new ones.
In a statement on Friday, the Reserve Bank of India (RBI) said that from January 1, the daily ATM cash-withdrawal limit would be increased from 2,500 rupees ($36.77) to 4,500 ($66.20) rupees.
But it said there would be no change in weekly withdrawal limits.
Throughout the day, across Indian towns and cities, people lined up at banks to meet the deadline and avoid their money becoming worthless.
At the end of the drive, Arun Jaitley, finance minister, said the currency situation had stabilised in recent days and crowds outside banks had eased.
“The RBI has sufficient stock to inject a lot more currency and they will continue to do so [in coming days],” he said in the capital New Delhi.
Queues at cash machines will probably continue over the next few weeks as the RBI’s printing presses have failed to replace fully the discontinued banknotes.
Modi was initially praised for his assault on tax evasion but long queues outside banks, cash shortages and policy flip-flops quickly led to anger in some quarters.
Having come to power in 2014 pledging to tackle “black” money, Modi was forced on to the defensive as frustration grew at the slow introduction of the new notes.
There has been anger in rural areas where farmers have been unable to sell crops, while small traders have reported a huge drop in earnings owing to a lack of paper currency in the system.
While many local businesses have heeded Modi’s call to move towards a digital economy, some industries have ground to a halt and laid off staff, highlighting just how dependent India currently is on cash.
Indians have until March 31 to deposit old currency notes directly with the RBI, but Friday was the last opportunity they had to do so at their local bank branches.
After the March deadline there will be a minimum 10,000 rupees ($146.5) penalty for holding old banknotes, the Press Trust of India reported.
Many Indians insisted that they did not mind the hours queueing if it forced the rich to pay taxes.
Modi will seek to regain some of that goodwill when he makes a New Year’s Eve address to the nation on Saturday.
Modi had said his government would end the chaos and restore normality in 50 days.
But critics of demonetisation say the impact will last at least six more months, with concerns about lower economic growth, job losses and a fall in demand for goods.