Universities and students struggle in cash crisis

The Indian government’s snap decision earlier this month to withdraw higher denomination banknotes has left all sectors of society reeling, from wealthy businessmen to subsistence-level farmers. As with others, India’s university students are having to cope as best as they can.

However, with semester fees and examinations due in many universities and colleges, where students are unable to pay online, universities are having to issue IOUs or set up other temporary arrangements after reporting chaos in the first two or three days after the announcement.

Junaid Hussain Khan, a postgraduate student in mass communication at the Jamia Millia Islamia or JMI university in the capital, said he found himself suddenly deprived of cash when Prime Minister Narendra Modi announced his demonetisation plan without warning on 8 November.

Higher denomination banknotes would no longer be legal tender from midnight that day and had be exchanged for new notes or smaller denomination notes.

This left just hours for last-minute purchases and transactions using the soon to be worthless Rs500 and Rs1,000 notes, which made up more than 80% of currency in circulation, causing panic and huge queues at banks all over the country as people tried to exchange their notes.

“I had to spend six to eight hours for three consecutive days standing in long queues just to change currency,” Khan said. “Students staying outside the campus hostels found themselves unable to pay rents and basic bills. Many of us had to reduce meals to twice a day for lack of usable money.”

Running out of cash

According to Khan, matters were worse in other cities. “My sister and brother who are in colleges in a smaller town say that banks stopped accepting cheques unless they were local ones. My brother couldn’t pay his examination fees in time because the money couldn’t be transferred from home.”

Many ATMs ran out of cash and students could not attend classes while queuing for cash. During exam season in many colleges and universities, students could not afford to spend time in lengthy, slow moving queues. Other students spoke of not being able to pay for bus fares because of the shortage of small notes and some had been told they could travel as many times as the value of the notes, using them as a kind of advance payment.

Students said they also had problems finding cash to buy books to study for examinations or even for photocopying notes and other study materials. In India’s mainly cash economy most outlets would not accept cards and many that do tend to be more expensive than others, so students on a tight budget were reluctant to use them, they said.

Others relied on friends lending them cash or standing in line on behalf of several students at a time.

Many students said they did not even have bank accounts and were relying on their parents being able to get small-denomination cash to them via friends and relatives – something that has hit out-of-town students particularly hard.

Akansha Roy, another JMI student, said she had to manage without cash for four days. “Online transactions were fine, but you do need cash for petty purchases and I ended up borrowing lower denomination currency notes from an aunt. I did stand in a queue outside an ATM machine and experienced the urgency to withdraw the newly minted notes that are to replace the old ones.”

JMI’s administration eventually stepped in to organise separate queues for students at ATMs and bank counters operating from within the sprawling campus.


Ayantika Das, an MPhil student at Jawaharlal Nehru University or JNU in New Delhi, said things were difficult for her because she fell ill and had to borrow money for medical care. “Still, I consider myself lucky because I am on a fellowship and better off than undergrad and postgrad students who generally depend on their parents to send them money.”

Das said she and other students from JNU, known for its left-wing politics, were eager to take part in the rallies and protests in the capital against demonetisation. “But many of us could not join in because we didn’t even have money for the bus fares to rally venues,” she said.

Most of the protests were against what is now being considered a poorly planned government move that may take months to settle down. Details such as differing sizes of the new currency requiring recalibration of ATM machines are yet to be sorted out. The result of these failures is a massive shortage of usable currency notes.

Some better organised

Things were different in the better organised universities. Panjab University or PU in Chandigarh, rated as one of the country’s top institutions, had already switched to online transactions some time ago for various payments like tuition payments and admission fees.

“For many years now, becoming a student at PU also means opening an account at the campus branch of the State Bank of India. So online payments, payments through bank debit, were already routine here,” says Rajiv Lochan, professor of history at PU.

Things were easier at the university, partly because the campus has two bank branches and several ATMs, Lochan said, “so drawing money, depositing money and exchanging money went off rather well for everyone. Also, any shops on campus were already using swipe machines for sales and the others quickly switched”.

But PU went a step further in extending deadlines for students in order to ease the pressure. “Considering that the student body of PU comes from extremely diverse backgrounds, lives in extremely diverse (and often very difficult) localities, the university announced the extension of the last date for depositing examination fees etc,” Lochan said.

‘Surgical strike on black money’

The somewhat draconian way the demonetisation was announced was aimed at flushing out large hoards of unaccounted cash that are said to support a large parallel or black economy.

Calling the demonetisation a “surgical strike on black money”, Minister of State in the Human Resource Development Ministry Mahendra Nath Pandey told students at JMI’s annual convocation just three days after the announcement that the move would be beneficial for students in the long run.

In comments carried by the Press Trust of India news agency Pandey said “the decision would help the younger generation, especially students, in fulfilling their aspirations, like those of housing, as this step will help drive out black money from the market”.

But even supporters of the plan now believe the economy will suffer without ever achieving its aim.

As cash hoards dry up, small businesses are taking a hit and trade bodies have reported a 50% shrinkage in activity and there are now real fears of a looming recession.