Cash machines in many Indian cities ran out of notes on Tuesday, but authorities allayed fears of a cash shortage saying there was more than adequate currency in circulation in the country.
ATMs were empty or not working in several states such as Karnataka, Maharashtra, Andhra Pradesh, Rajasthan, Uttar Pradesh, Bihar, Madhya Pradesh and Telangana, domestic media reported.
People in the Indian capital New Delhi also said they were not getting cash out of the ATMs, bringing back memories of long queues and non-functioning machines after the government's cash-swap measure in November 2016.
However, cash was being disbursed at bank branches as usual.
The 2016 demonetization measure scrapped 500- and 1,000-rupee notes (7 and 15 dollars), taking out 86 per cent of the currency in circulation in a cash-reliant economy.
"(I) have reviewed the currency situation in the country. Overall, there is more than adequate currency in circulation and also available with the banks," Federal Finance Minister Arun Jaitley tweeted on Tuesday.
"The temporary shortage cause by 'sudden and unusual increase' in some areas is being tackled quickly," he said, without explaining the cause behind the sudden shortage of cash.
Jaitley's deputy, Shiv Pratap Shukla, insisted government agencies had stepped in to meet the spike in demand and the problem would be resolved in the next two to three days.
He said certain states had a shortage of currency while others had a surplus, and the central bank had set up a committee to expedite the transfers within states and balance the currency situation.
Media reports said the cash crunch had been building in the states over the past few days. People said they had been facing difficulties at the ATM kiosks since Monday.
"We have visited 5-6 ATMs since morning. We need to pay for the admission of children to school and purchase groceries," a resident of the northern city of Varanasi told the ANI news agency.
Rajnish Kumar, chairman of India's largest bank, the State Bank of India, said it was wrong to say it was a cash crunch as the demand for cash had gone up in the procurement season beginning April.
He appealed to people not to panic since according to the central bank figures there were 275 billion dollars worth of high-denomination bills in circulation, much more than pre-demonetization levels.
But some media reports quoting bank officials said there were sudden withdrawals of cash stemming from apprehensions over pending legislation that proposes to use depositors' money to bail out their bank or financial institution if it fails.
Indian opposition leaders criticized the government for mismanagement of the financial system.
"Mr Modi has destroyed the banking system of the country," Rahul Gandhi, head of the main opposition Indian National Congress, told reporters in New Delhi, referring to a 2-billion-dollar scandal at a state-run bank that was detected earlier this year.
