Prime Minister Narendra Modi on Friday defended his decision to withdraw high denomination bank notes from circulation, as a deadline to end severe cash shortages passed with Indians still queuing at banks to deposit savings and withdraw money.
Modi abolished 500 and 1,000 rupee bills on Nov. 8, taking out 86 percent of cash in circulation, in a bid to fight corruption, end terror financing and turn India into a cashless society.
The move, however, caused a major cash crunch as the government struggled to replace old notes with new 500 and 2,000 rupee bills. Modi had asked for 50 days, until the end of this month, to ease the crisis.
Speaking in New Delhi at the launch of a digital payment app linked with a nationwide biometric database, Modi exhorted Indians to reduce their dependence on cash.
“The world is surprised to see the way we’ve overcome the challenge after 86 percent of cash was withdrawn,” Modi said.
He is expected to address the nation on New Year’s Eve to further talk about so-called “demonetization”.
While cash shortages have eased somewhat, bankers and analysts said the situation is far from normal and could last at least another six months. They said the move could hit economic growth and lead to job losses and a drop in demand for goods.
Only 35-40 percent of ATM machines were dispensing cash, according to Ramaswamy Venkatachalam, managing director, India and South Asia, Fidelity Information Services, a banking technology provider.
The government has put a weekly cap on how much an individual can withdraw from an account at 24,000 rupees, but many banks were only handing out 10-15,000 rupees to clients because they did not have enough cash to go around, said Harvinder Singh, general secretary of All India Bank Officers’ Association, which represents nearly 300,000 bankers….
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