Chaos to continue, confirms Jaitley

Addressing the media on Saturday, Union Finance Minister Arun Jaitley said: “ATMs could not have been calibrated (before the announcement) because of secrecy issue. Thousands of people are involved in recalibration exercise (and) secrecy could not have been maintained. Recalibration takes at least 2-3 weeks,” he said. 

Terming demonetisation as a massive operation, he said there will be inconvenience in the first few days “but the long term advantages of this are to the overall economy”. 

Till the ATMs are not being recalibrated to dispense new notes, people would have to wait for several hours in serpentine queues for withdrawing their own money from different branches of banks and post offices across the country. In some states, banks will be open on Monday too. 

However, assuring that the RBI and banks have stacked up enough currency to replace the Rs 14 lakh crore worth of Rs 1,000/500 notes that have been declared invalid, he said the government is constantly monitoring the situation as it is a “massive operation”.

At a hurriedly called press conference, Jaitley urged people not to flock the banks to exchange the now-defunct banknotes, asking them to stagger it over the 50-day window provided by the government for the purpose. 

The briefing, second in three days, was called after anger and chaos over never-ending queues were witnessed at banks that struggled to exchange old notes and give out newer Rs 2,000 notes and smaller denomination currency.

Shockingly, less than 40 per cent of the ATMs were operating in the country and they too ran out of cash within hours. The new Rs 500 note was available only in Delhi and Mumbai and RBI has already started releasing Rs 100 notes to cope with the demand. 

In the short run, the Finance Minister added, some “obvious” disruption will be caused. “But once the money is available both in the system and more so in the banking system, the advantages of that to the economy and businesses will be far more. The capacity of the banks with all this additional capital to lend and support businesses is going to be far higher. 

“And therefore, medium term and long term advantages to the economy as against this temporary inconvenience or disruption, are far too many,” he said. Jaitley further said, SBI’s deposit is around 20 per cent of the total deposits in all the banks in the country. He also said that despite allegations by Opposition parties that there was spike in bank deposits leading up to the demonetisation announcement, no such spike has been seen in any month, except September 2016. 

Anger and impatience rose across the country as banks struggled to cope with the rush of people wanting to exchange junked notes, while more than half the ATMs remained out of service for the fourth day in a row and the operational ones ran out of cash within hours. There were reports of skirmishes between people who had queued up to exchange or deposit their old and now defunct 500 and 1000 rupee notes and bank officials over the long wait and banks falling short of cash. As not all the 2.02 lakh ATMs in the country have been calibrated to vend new, differently sized Rs 2000 and Rs 500 notes and the old Rs 100 ones, small businesses which deal mostly in cash were hugely impacted. Bankers are expecting even greater rush on Sunday. 

The demonetisation, some economists say, has dealt a big blow to purchasing power, particularly of lower middle class and may lead to short-term disruption in economic activity. 

Interestingly, the words which were used to condemn the UPA government’s move to exchange pre-2005 currency notes for new ones in January 2014 has put  Prime Minister Narendra Modi’s demonetisation move under scanner. The BJP in January 2014 had dubbed the UPA government’s decision to exchange pre-2005 currency notes as detraction from the larger issue of black money. 

Opposing the then government’s move, BJP spokesperson Meenakshi Lekhi had said: “The sufferers are the aam aaurat and aadmi; those who are illiterate, who have no access to banking facilities. They will be the ones who will be affected by such diversionary measures.”