Costs of Demonetisation: Mobs Attack Banks in Gujarat, UP; Credit Growth May Hit 54-Year Low

A daily round-up on the human impact of demonetisation.

Angry mobs attack banks in Gujarat, Western UP for not having cash

Amid rising fury over the lack of cash in banks even over a month after demonetisation went into effect, bank branches in two districts of Gujarat were attacked by angry mobs on Monday.

The State Bank of India and Dena Bank branches in Samadhiyala village in Amreli district were locked up by people after those waiting in long queues – most of whom were farmers – were informed that the banks did not have any cash, the Indian Express reported.

Some bank branches in Surendranagar district were also targeted and their doors and windows damaged after they were found to have been kept closed for the third consecutive day since Saturday.

Similar incidents occurred in western UP too. Angry villagers in several parts of Shamli and Muzaffarnagar held protests on Monday due to a lack of cash in banks and some even pelted stones at a local SBI branch, the Hindu reported.

The manager of the bank in Kakroli village of Muzaffarnagar logged a police complaint after the protest. “People were angry at the absence of cash in the bank. They started protesting and some of the agitated members of the crowd also pelted stones at the bank which destroyed the bank property,” the police reportedly told the media.

Some 40 kilometres away from there, in Fatehpur village of Shamli district, angry customers vandalised the local branch of UP Gramin Bank due to the unavailability of cash.

Credit growth could likely hit 54-year low

While the note ban has led to Rs 12.4 lakh crore in cash being deposited into the banking system – a sector that is expected to gain from the move in the long term – the banks have been hit hard in the immediate aftermath of the policy due to a plunge in the demand for credit.

The sector has long struggled with low profitability and currently has sour loans worth $136 billion.

According to Reuters, the government needs a healthy banking sector to channel loans and fuel private investment to power an economy that grew 7.3% in the July-September quarter.

Arundhati Bhattacharya, chairperson of SBI, told Reuters that the bank’s assets would likely miss previous forecasts of boosting loans by at least 10%. According to Bhattacharya, there has been a slowdown in retail loans and the early repayments of outstanding loans by people using old notes has also contributed to the overall credit slowdown.

According to Reuters, Jefferies, a brokerage firm, expected banking sector loan growth to fall to 6% in the year to March, making it the slowest since 1962.

In the last fiscal year, loans grew 10.9% and 9% in the fiscal before that.

Unable to withdraw cash for son’s wedding, UP farmer commits suicide 

A farmer from UP’s Sadhpur village committed suicide after he was unable to withdraw cash for his son’s wedding.

The 48-year-old farmer, Satish Kumar, was rushed to the hospital after he consumed poison, where he was declared dead, DNA reported.

According to Kumar’s family, he had been unable to withdraw cash for his son’s wedding despite standing for long hours in queues outside banks.

While the common man waits in queues, illegal exchange of currency flourishes

Even as thousands stand in queues outside banks and ATMs across the country hoping to withdraw cash or exchanged their old Rs 500 and Rs 1000 notes, the illegal exchange of demonetised currency notes is continuing to flourish.

According to an Economic Times report, if you can manage to pay a steep commission, agents across the country can get you the new notes in a matter of hours.

“If you have Rs 1 crore in cash, we can exchange it in one hour, anywhere in the country,” an agent involved in the trade told Economic Times. He added that he can exchange up to Rs 5 crore in old currency in a day but added that the service is available for those who have been recommended by someone who has already exchanged money through them.

According to Economic Times, the commission for doing such transactions is 10% at present.

Those involved in the trade have even alleged that the staff at several bank branches – both private and state-run – are part of the racket and that the black money exchangers have made deep inroads into the system.

Another person dealing in the illegal exchange of currency told ET that there was a long chain involved in the racket, including bank employees.

“Look, it’s not just one bank or branch, or one state from which we are getting the new currency,” he told ET. “If you thought that this money is just coming from private banks, you are mistaken.”

Yogendra Yadav’s “explanation” for depositing cash

Swaraj Abhiyan leader Yogendra Yadav took a dig at the government and the central bank over its announcement on the 41st day after demonetisation that if anyone depositing cash in banned currency in excess of Rs 5,000 will have to explain to at least two bank officers why they could not do so earlier. Yadav offered his “explanation” for depositing money now as opposed to earlier.