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Many bank branches are yet to get the new Rs 500 notes. Rs 100 notes are still in short supply and most people are reluctant to accept the Rs 2,000 notes, said bank officials.
Bank unions have demanded that the RBI increase the supply of notes to meet increasing demand for money.
People can withdraw up to Rs 24,000 per week from banks and Rs 2,500 from ATMs a day, but most banks have said they need to ration the withdrawals as there is not enough money.
In Delhi, people waited for two hours outside a bank only to be told, when the branch opened, that there is no cash. Expecting angry customers, bank employees have suggested police protection in the next few days.
The State Bank of India, India's largest public sector bank, has said it is ready for the cash rush, admitting that the situation is "not normal" yet.
"That it is an absolutely normal situation is a statement I can't make. We are getting supply wherever we are telling them there is a shortage, they are making efforts," SBI Managing Director Rajnish Kumar told NDTV.
Mr Kumar said of the Rs 14 lakh crore banned cash, almost Rs 2 lakh crore has been pumped back into the system.
"We are very much prepared...For the last 20 days, we have been working at 100% capacity," Mr Kumar told NDTV, adding that arrangements had been made for orderly handling of queues, seating and even serving water.
Prime Minister Narendra Modi 's sudden announcement of a ban on 500 and 1,000-rupee notes to choke tax evaders took 86 per cent of the money out of circulation in one go, resulting in a massive cash crunch. The government has promised that the situation is temporary and will ease soon.
Opposition parties have accused the government of being poorly prepared to handle the impact of the currency ban, which they allege has punished the poor instead of the corrupt as was intended.
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