Angry Mobs Lock Up Indian Bankers As Cash Chaos Soars: "We Are Fearing The Worst"

Tyler Durden's picture

India's demonetization campaign is not going as expected.

Overnight, banks played down expectations of a dramatic improvement in currency availability, raising the prospect of queues lengthening as salaries get paid and people look to withdraw money from their accounts the Economic Times reported

While much of India has become habituated to the sight of people lining up at banks and cash dispensers since the November 8 demonetisation announcement, bank officials said the message from the Reserve Bank of India is that supplies may not get any easier in the near future and that they should push digital transactions.  “We had sought a hearing with RBI as we were not allocated enough cash, but we were told that rationing of cash may continue for some time,” said a banker who was present at one of several meetings with central bank officials.

Reserve Bank has asked us to push the use of digital channels to all our customers and ensure that we bring down use of cash in the economy,” said a banker. This confirms a previous report according to which the demonstization campaign has been a not so subtle attempt to impose digital currency on the entire population.

Bankers have been making several trips to the central bank’s headquarters in Mumbai to get a sense of whether currency availability will improve.  Some automated teller machines haven’t been filled even once since the old Rs 500 and Rs 1,000 notes ceased to be legal tender, they said.  Typically, households pay milkmen, domestic helps, drivers, etc, at the start of the month in cash. The idea is that all these payments should become electronic, using computers or mobiles.

This strategy however, appears to not have been conveyed to the public, and as Bloomberg adds, "bankers are bracing for long hours and angry mobs as pay day approaches in India."

"Already people who are frustrated are locking branches from outside in Uttar Pradesh, Bihar and Tamil Nadu and abusing staff as enough cash is not available," said CH Venkatachalam, general secretary of the All India Bank Employees’ Association. The group has sought police protection at bank branches for the next 10 days, he added.

Joining many others who have slammed Modi's decision, the banker said that "this is the fallout of one of the worst planned and executed government decisions in decades." He estimates that about 20 million people - almost twice the population of Greece - will queue up at bank branches and ATMs over the coming week, when most employers in India pay their staff. In an economy where 98 percent of consumer payments are in cash, banks are functioning with about half the amount of currency they need.

As Bloomberg notes, retaining public support is crucial for Modi before key state elections next year and a national contest in 2019, however it appears he is starting to lose it.

"We are bracing ourselves for payday and fearing the worst," said Parthasarathi Mukherjee, chief executive officer at Chennai-based Laxmi Vilas Bank Ltd. "If we run out of cash we will have to approach the Reserve Bank of India for more. It is tough."

* * *

The ongoing cash shortages follow Modi’s Nov. 8 unexpected decision to ban 500 and 1,000 rupee ($15) notes, a decision that sucked out 86% of currency in circulation and blindsided the nation. Bank officials reported that most top banks in the financial heart of Mumbai are now starting the day with anywhere between 800 million rupees to 1.2 billion rupees of cash, instead of the typical 1.5 billion rupees. 

These currency chests are then shared with several branches, which are rationing supplies. Withdrawals are capped at 10,000 rupees per person instead of the 24,000 rupees limit set by the government, said a manager at a state-run Bank of India branch in the eastern state of Jharkhand.

In a Mumbai suburb, a branch of the nation’s largest lender, State Bank of India, was starting the day with about 600,000 rupees of cash that will run out in about an hour, compared with the 1.5 million they’d typically have, the manager said. in what has clearly become a physical cash run.

Shortage of cash in ATMs continues

* * *

To be sure, many employers are scrambling to adapt to the new cash-lite regime: "with pay day around the corner a lot of small and medium-sized companies are opting for prepaid cards over cash payments," said Naveen Surya, managing director of payments solutions company Itz Cash Card Ltd., who’s also chairman of the representative body Payments Council of India. "More than five million of these cards have been sold in India in the last one week" and sales of 40 million more are expected through December, he said.

Ride-sharing service Ola has partnered with fuel companies to help drivers get e-vouchers to fill up their tanks at Bharat Petroleum Corp. pumps in Bengaluru, the company said in a statement. Paytm, India’s largest digital wallet startup, has noticed a doubling in online recharges including a trend where individuals top up multiple mobile phones to help friends and family, the company said in its statement. Additionally, as Goldman notes, Paytm has experienced a 500% surge in daily user
growth since the currency reform, according to The Indian Express.

Searches on 'Paytm' and 'ATM queues' still elevated

The government, too, is urging electronic payments. Card payment facilities were introduced in parliament’s dining hall on Wednesday, the Press Trust of India reported, citing Parliament’s Food Committee Chairman A P Jithender Reddy.

While large companies such as Hindustan Petroleum Corp. make 99 percent of their pay outs electronically, it still needs to work out a system with smaller sub-contractors, said finance director J. Ramaswamy. Indian Oil Corp. is opening State Bank of India accounts for all laborers at its Paradip refinery, Dharmendra Pradhan, India’s oil minister, said on Nov. 29 in New Delhi.

"I will request all our companies to encourage bank transfers for all such payments," Pradhan said.

Alas, as we warned previously, for a nation that remains vastly cash-based - and where 98% of consumer payments are in cash - any transition from physical to digital money will take far, far longer than the timeframe Modi has allotted himself for the demonetization transformation and, as we reported previously, it is only a matter of time before India's economy becomes crippled by money shortages to the point where not only India's economic output but the government itself will be in jeopardy.

One thing appears clear: foreign investors have decided not to wait and see how this experiment ends.

Foreign investors continue to be net sellers of Indian assets post currency reform

* * *

To get a sense of India's now-three week long cash-run reality, courtesy of one of our contacts on the ground in India, here are photos of lines in front on Indian ATMs and banks taken this morning between 10 and 10:30 am.

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hedgeless_horseman's picture

 

No angry mobs in North Carolina?

 

No charges for Charlotte cop in Keith Lamont Scott shooting

 

Murray told reporters that Scott was armed and refused to comply with officers' commands to drop it.

 

 

 

 

Think that cops are shooting too many black men? Think again.

 

http://www.zerohedge.com/news/2016-10-06/rule-number-3-gunfights-action-...

NoDebt's picture

God, why don't we do this kinda stuff in the US?  Because we're a bunch of pussies is why.

Free Jon Corzine.

 

Boris Alatovkrap's picture

Be wary! India currency crisis is man-made intentional, trial balloon like was Cypriot Bail-in, to see just how much skimming of wealth is tolerate by compliant population.

froze25's picture

Anyone know any good ETF's that follow the BSE or NSE exchanges?

MillionDollarBonus_'s picture

It’s a tough transition but eventually the Indian people will settle down and accept that a cashless society is best for everyone. A cashless society gives governments more control over the flow of money, and allows them to simplify and streamline the tax system by automatically deducting taxes and levies from peoples’ bank accounts. It also allows us to implement negative interest rates and stimulate aggregate demand, while preventing bank runs when banks become insolvent. It’s a win-win-win for everybody – I don’t really understand why people are rioting?

LORD MONCKTON – A PIONEER OF FAKE SCIENCE
VWAndy's picture

 Dude where you been? It just aint the same without ya.

InsaneBane's picture

He lives in a parallel universe..travels back and forth. A legend in his own mind

manofthenorth's picture

"the message from the Reserve Bank of India is that supplies may not get any easier in the near future and that they should push digital transactions."

Most important sentence.

Total control is the name of the game.

espirit's picture

Those stashed British Enfields haven't yet come out of the closets.

Frog pot set to simmer.

SoDamnMad's picture

I hear the Pakistanis are doing a great business selling AKs across the border.

East Indian's picture

for what? Old 1000 rupees notes?

Slomotrainwreck's picture

WTF? Don't these bankers know about IOU's?

NewHugh's picture

MDB realizes that he's a total laughingstock these days after his clever predictions are all turning out to be wrong.  He now trolls as fukidontknow and pretends to be an MDB hater.  Yet still posts links to his moronic accredited times website.  What an imbecile!

TheMeatTrapper's picture

Wonder if Ori the ornery Indian got locked up the in confusion? He never seems to materialize on these threads - only the ones where he gets to criticize the US, after he first states how much he loved it here. lol.

Oh regional Indian's picture

Haaaha...go trap some meat man. And sit in a cold pond while you are at it to douse the fire in your ass...

ArgentDawn's picture

The real MDB disappeared years ago. This new one puts in a quarter of the effort.

 

bring back old MDB! at least he made tangible aruguments

joak's picture

So true ! We should not question the legitimacy of government taking directly money on our bank account, it's somehow their money since without the government no economic activity would be possible.

oncefired's picture

How will you buy your drugs without cash?

shamus001's picture

Guess that will either put the banks money laundering operation out of business. (too important for the U.S. GDP)

Or there will be large sales volumes of knee-pads and mouthwash!

FIAT CON's picture

Oh don't worry the banks like HSBC will do their drug money laundering with gold! no problem.

legalize's picture

Dealers will only accept silver eagles in my neighbourhood.  They always catch on first.

espirit's picture

Saw the Indian owner of a BP Gas Station take in 5 pre 65 U.S. Quarter Dollars for a pack of 305 cigs and $2.00 change.

Dude refused $10.00 for an ASE.

 

Can ya spell siphon at all levels?

Son of Loki's picture

The Elites on Wall Street and the DC Establishment people like Hillary Clinton know what's good for us, right?

jvetter713's picture

One of your better posts...especially as of late.

Kudos!

Stuck on Zero's picture

It's a really tough transition to wipe out the middle class.

StillSilence's picture

You said, "us."

You admit to being a govt employee....of some sort.

Tekshop's picture

MDB you REALLY are hillarious.

 

BeanusCountus's picture

Just who is "us"? You and your "us" partners could find yourselves in a bad spot. Sooner than you thin.

Mustafa Kemal's picture

I dont know about that. I think more like practicing

webmatex's picture

1.3 Billion people.

This could be the largest bureaucratic cluster in history.

Lots of new bank accounts and bank charges and taxes for the peasants.

Gold next or....?

Secret Weapon's picture

One of my patients is from India and she says the currency crisis is manufactured because there are elections in the northern states and Modi is trying to deprive his opponents of the cash necessary to carry out their election campaigns. 

Dubaibanker's picture

She is correct in her thinking unlike most overseas Indians who blindly support "Hitler Modi".

Demonetization has been primarily done due to 2 reasons:

1. To consolidate power and muscle out entire opposition in one go in order to win the critical largest state of 200m electorate - UP.

2. Banks were insolvent and bad loans have risen to 11.2% of assets and are at highest levels in 11 years while Govt has said they simply cannot inject more capital and capital raising bonds have failed to get issued and mergers have halted.

USD 5bn of FII's has exited in just 18 days post demonetization.

USD 34bn of Non Resident Indian funds had to exit before 2 Dec which came into India in Sept-Dec 2013 when Indian Rupee had plunged to INR 69 to 1 USD and Gov. Rajan was brought in (From Chicago Univ) to control the mess. He asked Non resident Indians to invest in India in USD instead of INR witht half the cost of hedging absorbed by the Reserve Bank. All of this money being USD 34bn was leveraged hence had to exit India before 2 Dec 2016. This turned a bad loan situation combined with a USD 34bn exit of deposits with lower interest rates a noose around the neck of the Govt who have no other solution except doubling of interest rates or such insane moves in order to prevent a banking collapse.

In short, insolvency of banks and Govt along with elections were the two main factors for this insanely crazy move. All other justifications of patriotism or removing terrorism or digitalization or whatever have been formed post the decision in order to appease the illiterate Indians.

Now 1.3 billion people are standing in queues unable to access their own cash which is called CAPITAL CONTROLS in normal parlance while the 70m rich or upper middle class or Non Resident Indians enjoy consolidation of their power as the elephant sized rich who control the Indian economy as well as it's Govt become richer while the simply rich struggle and the poor and middle class have been strangled and more thn 100 have commited suicide or even murdered due to dowry and non payment of cash in new notes etc.

Nothing less than a revolution and murder of thousands will bring this nation back of which Modi and his party are the cheerleaders from Ayodhya deaths to Gujarat riots and the death of Mahatma Gandhi etc. Since the party that always starts the riots in India are in power hence riots have not started as of yet. These will probably be the only organic riots to start in India.

Dec 1 is a very critical day because it is pay day in India where over 90% of the employed get paid in cash or need cash to survive but the banks and ATM's are running empty hence banks have asked for police protection in various cities and towns. The major test of Indian demonetisation experiment is this week and next as the suffering continues.

Let's hope the passive sufferers that are Indians will rise up one day. One can always have hope.....which always dies last.

Yog Soggoth's picture

India is getting ready to drop zeros from theire currency. Less words .Digital plastic. What are other countries central banks up to right now? Pretty selfish to think of India even if it has the largest population by volume. This is a bigger world. Roughly 1% of Americans care to read international news.

WorldRemit to start digital Money Transfers to Cameroon | News 24 ... https://news24africa.com/worldremit-to-start-digital-money-transfers-to-cameroon/
 

 

cool_guy's picture

There again..I.S.I agent sitting in Dubai passing judgements on Modi....If Modi is Hitler your RADICAL ISLAMIC REGIMES must be Taimur + Chengez times 1 million......btw, How's the supression of women going on in your pure lands?....

Has any victimized woman manage to get 4 "male" witnessness of her abuse as per your "great" law?....

Don't try your victimhood tactics with Indians. We know your clan pretty well......you can fool the guillble Europeans (even there, not for too long now) and other westerners...we know you intrude lands, take shelter under our secular laws, live on doles and breed out the hosts to undermine their democracy....That won't work under Modi...or Trump...and that frustrates you :)-...so be it.

Most Indians poor and middle class are happy with demonitization.  Those lines showin are normal in a country of 1.3 billion

http://seekingalpha.com/article/4032011-tiger-pounces-corruption-implica...

All currencies from Euro, Yuan to Malaysian ringgit are collapsing but the timely demonitization has flooded the Indian banks with capital and Indian currency has not dropped against the dollar...one of the few currencies to do so in the world...Inflation has gone down from 7% to 2%....Modi is sweeping poll after poll.......

Most Indians know there is nothing to fear...as FDR once said " The only thing we have to fear is fear itself"...nothing else....

INDIA today surpassed its colonial master BRITAIN to become the 5th largest world economy.....Dubaibanker....if you don't save your oil dependent economies you will go back to riding camels very soon..!.....

http://mashable.com/2016/12/20/major-world-economies-based-on-gdp/

My prediction is your voilent group that never learns... will clash with the declining West (hopefully Trump changes that)...China & Japan cutoff from their Asian heritage will particiapte in the dance...and India like America of WW2 will watch your games... come out unhurt and rise.....not to conquer or subjugate...but to live and let live...and as it has done throughout thousands of year of world history it will lead the world towards that Supreme power who liberates people from the cycle of life and death....OM!

 

webmatex's picture

Good way to fix an election - starve the voters to death.

Corrupt Modi.

cool_guy's picture

And did you think why in the world would it affect elections?.....it is because the corrupt filthy socialist, castiest parties have looted people and stashed cash to rig elections...now that cash is gone. Playing field is levelled...have them fight on the plank of development of all people.....can theose socialists do that?....

If they can what is there to fear......or maybe they know they sucked the blood of people too long and without the money and rigging they can't make it........

 

Let alone the fact that around $30-50 billion of corruption ridden cash has comeback to the govt...inflation is down....The rising dollar and interests rates have had "zero" affect on the Indian rupee. While Ukraine, Italy, Venezuela, China are seeing their banking system collapse..... INDIA IS RISING....

Land Snark's picture

I think if you look at the electoral college map, post election, I think you will find your answer as to "just how much skimming of wealth is tolerate by compliant population".

CPL's picture

And like Cyrpus, BitCoin will gain a bigger customer/business base without banks stealing their captial.  With the increase of BitCoin market share increases with more customers and business in the only free market with growth, security and no central bank douchebanks putting their hand in your savings.  The BitCoin marketplace and services are only going up in value with organic adoption that reflects how fucked up the economy is.

Eventually in a couple of years we'll have quarterly reports in satoshi's as the denomination of choice for the companies that want to survive and thrive, while the legacy economy beside it burns to the ground because of gross mismanagement.

SoilMyselfRotten's picture

If BTC is a possible escape from their scheming plans to go cashless you can be assured they will take it away. Just as they're likely to make it untenable to hold gold. They won't leave may outs, guaranteed.

kochevnik's picture

How exactly do they "take away" a number that only exists in your head?  You claimed that before, but never explained yourself

SoilMyselfRotten's picture

Are you suggesting they can't make transacting in BTC illegal if it 'threatens' the monetary system(whatever their version of it is)?

Yog Soggoth's picture

1,st rule don't talk aboot them.

2,nd rule don't mention they.

3, where are you leading others.

SILVERGEDDON's picture

Government decides Bitcoin is competition for their theft of our money. 

Then, government slams the washroom door of life on the Bitcoin cock, and you got bent non working Bitcoin cock. Nothing but a painful memory of what used to be.  

new game's picture

think i'll keep to myself til the dust settles on this. welcome to the new age of black market transactions.

black markets matter...