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Post-demonitization cash crunch drags on to dismay of average Indians

A CNBC commentator observed that 'rich businessmen whose dubious financial engineering skills partly prompted the government to take this step were conspicuous by their absence' in a line of 35 people at an East Delhi ATM.

December 5, 2016

Almost one month after the abrupt demonetization of 500 and 1,000 rupee bank notes by the government of Prime Minister Narendra Modi, India's currency calamity seems no closer to an end, as a roundup of news reports reveals.

Reuters reported the Reserve Bank of India has taken further steps to ease the cash crunch:

• a tax amnesty scheme for unreported cash, which will charge 50 percent in taxes and surcharges, and require that depositors place one-quarter of the total sum in a non-interest bearing deposit account for four years
• withdrawals of more than 24,000 rupees weekly will be allowed on deposits made in legal tender; withdrawals would be in new 500 and 2,000 rupee bank notes.

According to the The Economic Times the Reserve Bank of India has issued a mandate for FIs to give top priority to restocking of cash machines in rural areas with limited access to banking facilities. The move could hamper already stretched CITs in their efforts to keep urban machines operational.

The CIT situation somewhat diminishes the accomplishment of engineers around the country who, according to Live Mint, have recalibrated more than 90 percent of cash machines to handle the new 500 rupee and 2,000 rupee notes

The Indian Express, in a separate report, said Diebold Nixdorf, which manages approximately half of India's ATMs, has completed recalibration — and expects to see benefits to its POS-device business as a result of the government's push to replace cash payments with electronic transactions.

Another Economic Times report detailed a mandate to mobile carriers to give top priority to the rollout of "unstructured supplementary service data," that enables simple banking transactions via a feature phone. Telcos have been reluctant to push the service, which is low-profit and slows the system. Also, rural villagers don't understand how to use digital banking services, noted an article in The Indian Express.

Yet another report by Indian Express said that when an ATM in Kerala ran dry, people waiting in line placed a funeral wreath on its shutter, while in Delhi, another group of people organized a prayer vigil asking it to dispense cash.

In Mumbai, less patient cardholders have taken out frustrations on the security guards hired to monitor ATMs, an official told Mid-Day.com. Guards are also working 15 to 17-hour shifts to meet separate mandates for all-hours ATM access and 24/7 security officers.

In Delhi, police responded to 400 calls — most between 10 a.m. and noon — on the first payday after demonetization. The majority of calls reported line-jumping (including by police officers themselves) and attacks on ATM guards, The Indian Express reported.

In Kolkata, a hapless bank official found himself besieged by customers angry that the bank did not have enough cash on hand to allow account holders to withdraw the government-allowed maximum, Business Standard reported.

A CNBC correspondent in India recounted the travails of account holders he met while waiting 98 minutes in a line 35-deep to get cash in East Delhi. "One person I spoke to had spent the entire day trying to get cash to meet expenses," he reported.

Publications also carried reports of elderly men dying while waiting to exchange cash — one at an ATM, according to The Hindu, and another at a bank branch, according to a separate report from The Hindu.

And, as if Indian banks didn't already have enough to worry about, India's computer emergency response team has warned of potential cyber attacks on ATMS and POS terminals, according to the International Business Times.

U.S.-based cyber security firm FireEye, in its report, "2017 Security Landscape-Asia Pacific Edition," also warns of an increase in ATM attacks in India, citing outdated software and operating systems, according to an article by Tech2. 

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