Chaos at India’s banks as two bank notes are made illegal

A long queue builds up at an ATM at an airport in Delhi.
A long queue builds up at an ATM at an airport in Delhi.


Indians are forming long queues outside India’s banks after Indian Prime Minister Narendra Modi announced on the night of November 8 that 1,000 and 500 rupee notes (€13.70 and €6.90, respectively) would stop being legal tender.

The surprise broadcast sent Indians flocking to banks and ATMs to exchange the notes in the days after the ban came into force at midnight on November 9.

The move is an attempt by the government to combat tax evasion and the circulation of “black money”, or undeclared cash. In his speech, Modi said, “the five hundred and thousand rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper.”

A crowd gathers outside a branch of State Bank of India.


Banks and ATMs were shut for 48 hours. On Friday morning hundreds of people lined up outside to make withdrawals, although they have officially until December 30 to exchange all of their 500 and 1,000 rupee notes. Indians run the risk of a penalty of 200% on tax owed if they are found to possess undeclared cash.

According to the Reserve Bank of India’s annual report for the financial year 2015-2016, the 500 and 1,000 rupee notes make up 86% of all banknotes in circulation, and so unsurprisingly many banks and ATMs were forced to close because their cash soon ran out.

“It is the uneducated people with a lower income that are mostly affected”

Kautuk Haria is a media marketing student and entrepreneur based in Mumbai.

I went to the bank with a colleague and there was a long, long queue. I gave up but he stayed, and it took him three hours to reach the register.

The government said that it would cause problems for a couple of weeks and then would be okay. The problem is that people aren’t able to work because they have to spend their time standing in the bank queues.

While some people are angry, the movement is supported by a lot of people, including myself. The thing is, it has not been planned properly.

In India, people from a higher income background use plastic money, online transactions, and cards, and are not affected. It is the uneducated people with a lower income who don’t have bank accounts that are most affected.

Only 42% of lower middle income earners in India have a bank account, according to 2015 World Bank Financial Inclusion data, leaving those without an account with no other option but to put aside cash at home. This is because lower income earners living in rural areas do not have easy access to nearby banks, and the need for extensive documents to open a bank account is often unfeasible for those who are poorly-educated.

Since the measure to ban 500 and 1000 rupee notes came into effect, many Indians earning lower incomes found themselves with cash they couldn’t use and were unable to buy basic household goods, or food for their family. Local media reported that some people were given their day’s wages in 500 rupee notes – effectively useless until they manage to convert it. Meanwhile, stay-at-home mothers who had saved for years suddenly found themselves with piles of worthless cash that needed to be quickly converted.

Written by France 24 journalist Catherine Bennett.