Banknote blitz takes India by surprise

LONG queues formed outside banks in India on Thursday as they reopened for the first time since the government’s shock decision to withdraw the two largest denomination banknotes from circulation.

Some banks in the capital, New Delhi, had received the new 2 000 rupee (about R415) notes and some ATMs were working again, two days after Prime Minister Narendra Modi announced that the 500 and 1 000 rupee notes would no longer be legal tender in a blitz against tax evasion and corruption.

Modi’s bombshell on Tuesday prompted a late-night rush on cash machines as customers withdrew smaller notes before they closed at midnight in preparation for the turnaround.

“I have only come here to check if I can change my old notes for new currency even if I don’t have an account with the bank,” RP Singh, a newspaper vendor, said outside a bank in New Delhi. “The real worry is how we will get essential daily supplies in the next few days as most people are short of those smaller denomination or new currency notes.”

The government said customers could swap old notes for new ones or deposit them in their accounts from Thursday.

However, it was unclear how many banks across the country — particularly in rural areas — had received the new 2 000 rupee note. Newly designed 500 and 1 000 rupee bills will be rolled out later.

“The country has around 125 000 bank branches and an extensive network of post offices in rural areas, which should be enough. Let the exchange process begin and we will see if more is required,” said Finance Minister Arun Jaitley.

The government has said that only tax dodgers will lose out from the move, the latest in a series of anti-corruption measures by Modi.

Analysts largely welcomed the move, saying that while consumer spending would dip as the new notes came into circulation, in the long run the move would boost GDP. — AFP