When Narendra Modi surprised the world last year with his "note ban" announcement, several, memes and jokes were circulated. But a few days post that event, the humour faded and heated discussions erupted on every news channel. The sudden announcement gradually began to take its toll. Frantic citizens rushed to banks with hopes to change their notes only to find them closed. Labourers skipped work as they feared they might be paid with the banned notes. Businessmen shut their shops as no one wanted to deal with 500s and 1000s. Transactions and business came to a standstill as the most circulated currency notes were rendered useless. The country plunged in to chaos.
Amidst all the hue and cry in the cities, many forgot to ask what the conditions were in villages. The cash crunch did affect villages. During our visits, we noticed that the banks were very far off from the villages. Most of these banks had long queues and were crowded. ATMs were shut in many areas. For someone living in the interiors of a remote village where transport services are shoddy, it is very difficult to travel all the way to a bank. Many travel to the bank early morning hoping to avoid long queues. Often people return empty handed as banks close for the day.
The use of credit cards and other forms of digital currency is not very common in villages. Cash is the main mode for transactions. When asked about how the note ban affected the respective villages, we came across similar answers. The note ban did not hurt them, as they did not have too much cash in the first place. Long queues outside banks are regular sights in the villages. Many go to banks to collect reimbursement from the government for building toilets. Others go to collect compensation for losses suffered during cyclone Wardah.
Many villagers are farmers. unfortunately this means they do not have any fixed income. As a result, banks deny them loans. To circumvent this issue, residents often resort to moneylenders. Bikes, televisions and other luxury items are purchased in this fashion. Significant losses were suffered when Wardah hit Tamil Nadu. Not only were crops ruined, houses were destroyed as well. Their woes doesn't end here. Poverty hinders them from rebuilding destroyed huts.
The cash crunch has also resulted in payment issues. Since 500 and 1000 rupees notes had been banned, lower denomination notes began to grow scarce. A lot of farmers earn around Rs 100 a day. The lack of currency notes had resulted in some of them receiving no payment.
In some villages the immediate impact was not so severe. The villagers rue that they do not have enough money to face a cash crunch. What concerns them is the amount of money banks can churn out at any day. All banks get a fixed amount of cash from the Reserve Bank of India (RBI) regularly. It is from this stash that banks handover money to its customers. Since the note ban, supply of cash to the banks have been low. Coupled with the scarcity of lower denomination notes and the poor supply of money, banks run dry quickly.
Many villagers travel a long way to the banks and return empty handed. The money that these villagers are withdrawing is compensation after the effects of Wardah.