Modi promises to ease cash crunch

NEW DELHI – Agence France-Presse

AFP photo

Prime Minister Narendra Modi urged Indians on Nov. 14 to give him more time to resolve a cash crisis that followed the withdrawal of high-value notes, insisting the shock move would benefit the poor in the long run. 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 ($7.50) 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.

“I am aware you are facing difficulties with 500 and 1000 rupee notes ban. 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.”  

Banks remained open over the weekend to try to ease the crunch, but many ATMs were 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.