India rupees: Anxious customers swap banned banknotes

People are queuing up outside banks across India to exchange 500 and 1,000 rupee notes after they were withdrawn as part of anti-corruption measures.

Indians will be able to exchange their old notes, which stopped being legal tender at midnight on Tuesday, for new ones at banks until 30 December.

The surprise move is part of a government crackdown on corruption and illegal cash holdings.

Banks were shut on Wednesday to allow them enough time to stock new notes.

There are also limits on cash withdrawals from ATMs.

The BBC’s Yogita Limaye in Mumbai says there have been chaotic scenes outside many banks.

‘At one branch there are at least 100 people waiting outside. Worries that banks will run out of currency notes are driving people to queue up outside them. And the fears may not be unfounded. At least two banks I’ve been to since the morning are only allowing deposits and not exchange because they have run out of new currency notes,’ our correspondent says.

There was a similar picture in Delhi. The BBC’s Vikas Pandey says: ‘Almost every bank I have visited in old Delhi has long lines. People, mostly businessmen, are worried. There seems to be a lot of confusion over what people can and cannot do with their cash.’

The banned currency notes represent 85% of the cash in circulation in India, which is an overwhelmingly cash-based economy.

The top trend on Twitter India has been #CashCleanUp with tweets ranging from the frustrated to the humorous, as many Indians came to terms with the fact that much of their day would be spent in queues.

New 2,000 (about $30; £24) and 500 rupee denomination notes to replace those removed from circulation will be injected into the economy over the next ‘three to four weeks’, finance minister Arun Jaitley has said.

The move is designed to lock out money that is unaccounted for – known as ‘black money’ – which may have been acquired corruptly, or is being withheld from the tax authorities.

Finance secretary Shaktikant Das warned people with large amounts of hidden cash that banks would closely monitor the exchange of old notes for new ones.

The government says the move will flush out tax evaders and that all old notes deposited in banks will be subjected to tax laws.

Source; BBC