Across the country, ATMs are dead and the lines outside banks are killing. In a few cases, literally and unfortunately so.
An entire population of 1.25 billion is craving something they already have. It's a strange contradiction of shortage in abundance.
People can't bank the cash in their hand, nor lay their hands on the cash in their bank. As yesteryear screen villain Ajit famously never said, "It's like living in liquid oxygen..." The liquid is choking them and the oxygen is not allowing them to choke.
So, there's only one question to which the nation really wants the answer: Did Prime Minister Narendra Modi send a country into war against black money without planning? Did he push his troops to the front lines high on emotion and low on ammunition? The scale of the crisis since 11 November when the banks opened for transactions after two shut days suggests so. National Opposition parties and those opposed to Modi's sudden crackdown are sure this was a Quixotic idea of a destiny-seeking prime minister in desperate hurry. Even those who are willing to see this as part of their national duty are at a loss to explain the chaos and hardship unleashed by the cash purge.
The government, on the other hand, insists that if it had planned it on the lines the Opposition parties are suggesting — recalibrating the ATMs before announcing the note ban — this massive operation would have delivered a still-born. Any plan to recalibrate ATMs would have lifted the veil of secrecy and black money would have either changed colour or form. There was, the government says, just no way to do this other than to dive head first into the deep waters of currency replacement with a hope (that people would understand and endure) and a prayer (that it passes off without event).
The Opposition parties are not wrong — this could have been planned better — and the government is not giving us all the facts — it did have a plan. No, the plan was not for recalibration of ATMs — for which it now under severe attack — but for the preemptive calibration of ATMs. If this plan had run its course, it could have considerably smoothened the currency exchange at ATMs. But the plan ground to a halt even before it took off. But more on that later.
The evidence of a well-thought out plan comes from a publicly available notification of the Reserve Bank of India (RBI). Buried under dozens of notifications issued by the RBI this month, is the notification of 2 November (see below) that is headlined 'Dispensation of Rs 100 denomination banknotes through exclusive ATMs'.
The contents of the notification are even more noteworthy, in retrospect, of course. Under the cover of a 'pilot' project, the RBI asked banks to calibrate 10 per cent of all ATMs in the country to dispense only Rs 100 notes. To further throw prying eyes off the trail of the brewing demonetisation plan, the RBI slipped this big ticket reform under its pet Clean Notes Policy, on-going since 2013.
Here's the operative part of the notification signed by P Vijaya Kumar, chief general manager:
"A review of steps taken by banks for installing ATMs dispensing lower denomination banknotes was conducted and found that very few banks had taken initiatives in setting up ATMs dispensing lower denomination notes including Rs 100 denomination banknotes.
"In keeping with the objectives of Clean Note Policy and to ensure that genuine requirement of members of public for Rs 100 denomination banknotes are met, the banks should increase dispensation of Rs 100 banknotes through ATMs which are widely used for distribution of banknotes for retail use.
"With a view to encourage the banks in that direction, it has been decided to conduct a pilot project wherein 10 percent of the ATMs in the country will be calibrated to dispense Rs 100 banknotes exclusively. You are, therefore, advised to configure/calibrate 10 percent of your ATMs to facilitate this arrangement."
See the notification below:
There are 1,03,282 on-site and 98,579 off-site ATMs in the country. This brings the total to 2,01,861 ATMs in all (as per the RBI's bank-wise ATM statistics as of July 2016). That means by 17 November, when calibration was scheduled to have been completed, the government had planned for around 20,000 ATMs to be dispensing only Rs 100 notes. This would have considerably eased the hardship of citizens left stranded with notes they cannot use.
A little detour to understand the difference between calibration and recalibration is necessary here:
Every ATM has three types of cartridges — also called bins — to keep cash, one each for notes of the denominations of Rs 100, Rs 500 and Rs 1,000. To ensure that the ATM dispenses notes of only Rs 100, the cartridges carrying the other two denominations would require to be removed and replaced with cartridges of Rs 100 denomination. This change would not have raised any suspicions because Rs 100 notes were already in use. The banks would just need to order more cartridges of Rs 100 denomination. That is why the RBI notification mentions 'calibration' not 'recalibration'.
But distributing the new Rs 500 and Rs 2,000 notes from ATMs would have required changing the cartridges, or recalibrating them as per the size and other parameters of the new notes. Recalibration of nearly 1,80,000 ATMs (the number left after calibrating 20,000 ATMs exclusively for Rs 100 notes) across the country would certainly have had tongues wagging about the impending currency replacement. So, recalibration, it seems, was not part of the plan and Finance Minister Arun Jaitley spoke the truth when the government was blasted for not recalibrating ATMs.
Two things are obvious from a post-facto reading of this (then) seemingly innocuous notification.
First, the government and the RBI had anticipated that after removing the larger Rs 500 and Rs 1,000 denominations, there would be a mad rush for denomination of Rs 100 for retail use. And they had rolled out what now seems like a graded plan to meet the challenge of the small notes.
Second, the ATMs were supposed to have been ready by 17 November to dispense only Rs 100 notes. A day after that deadline has passed, it is unclear how many of the 20,000 ATMs are fully Rs 100-note-ready. Chances are very few ATMs are, because at 8 pm on 8 November, this plan was blown off the tracks by the prime minister's sudden announcement of demonetisation.
The notification was issued on Wednesday, 2 November and the prime minister went live on Tuesday, 8 November. That's a little over three working days between the two dates. It's hardly likely that the banks could have done much more than just crank up their systems. And after that, they have been left to deal with the deluge.
That raises the bigger question: If the calibration of ATMs was scheduled between 2 November and 17 November, why was the demonetisation bomb detonated midway knowing fully well that banks were still not ready? It is very unlikely that the two moves were disconnected from each other. The RBI could not have been on an indulgent Clean Note Policy binge six days prior to the entire banking system of the country being shaken from its roots. That would mean that RBI Governor Urijit Patel was not in the loop on the demonetisation plan. We know that is not possible because the the new notes bear the signature of Urijit Patel.
The RBI's notification does indicate that the government was working to a plan and a schedule. It suggests that the next big move on demonetisation should have been made after 17 November, although it is impossible to know how soon or how much later. But plans had to be abandoned. What was the provocation? Did the government suspect that the plan was leaked? Images of the Rs 2,000 note were, after all, floating on social media early in November. Did Narendra Modi detonate the demonetisation bomb earlier than scheduled?
Unless the government is forthcoming, we will have to keep wondering if on 8 November, Modi was announcing the demonetisation plan or delivering it prematurely.