No further supply of Rs 2,000 notes for now Says Government.
NEW DELHI: A cash crunch at ATMs has hit a dozen states, including Uttar Pradesh, Madhya Pradesh, poll-bound Karnataka, Telangana, Andhra Pradesh, Bihar, Gujarat, Maharashtra, Rajasthan, and Punjab. While the Chhattisgarh Chief Minister said his state, too, was facing a cash crunch, with the crisis expected to pass shortly, bank authorities in Jammu & Kashmir and the government in Maharashtra said their respective states were not facing an ATM cash crunch. With automated teller machines (ATMs) drying up, the central government and the Reserve Bank of India (RBI) stepped in to address the currency shortage.
Meanwhile, as people lined up at ATMs, the currency shortage issue went political. Opposition leaders, including Congress President Rahul Gandhi, demanded answers from the Narendra Modi-led government over the ATM cash crunch. Speaking in his Lok Sabha constituency of Amethi, Gandhi accused Modi of destroying India’s banking system and said that the “terror of note ban” had gripped the country again. Taking to Twitter, the Congress chief alleged that Modi had “snatched” the Rs 500 and Rs 1,000 currency notes from every Indian’s pockets and “given” them to Punjab National Bank fraud-accused Nirav Modi, who is currently absconding from the country’s law enforcement agencies.
Finance Minister Arun Jaitley attributed the cash shortage to an unusual spurt in demand during the past three months and described it as “temporary”, adding that the ATM cash crunch was being “tackled quickly” and that there was “more than adequate” currency in circulation. To fix the ATM cash crunch, the government said that the printing of Rs 500 denomination notes, about 5 billion of which are printed per day, would be increased by five times. Notes worth Rs 700-750 billion (Rs 70,000-75,000 crore) would be printed in a month.
A spike in cash withdrawals from banks over the last fortnight that people did not deposit into the banking sector has contributed to the cash crunch faced in several parts of the country, official statistics has indicated. This increase, finance ministry officials said, had led to a mismatch between the availability of cash and demand in several parts of the country.
In Andhra Pradesh, for instance, officials say people withdrew Rs. 483 crore from their bank accounts on 6 April. But only Rs. 219 crore was deposited into the banks by customers. In adjoining Telangana the same day, cash withdrawals were 130 per cent more than deposits. On Monday, people withdrew Rs. 29,475 crore from banks but only Rs. 23,651 crore made its way to the banks.
The Confederation of ATM Industry on Tuesday said that the daily cash flows into banks’ ATMs had fallen drastically since the first week of April and was now at as low as 30 per cent for public-sector banks. Below, you will find all the various causes for the ATM cash crunch, the proposed fixes, how quickly the currency shortages can be fixed, and what the government has to say about the situation.
However, what caused the cash crunch and ATMs running dry in the first place? The suspected hoarding of Rs 2,000 notes was cited as one reason by the government. The RBI, for its part, said that logistics and re calibration issues were limiting cash replenishment at ATMs.
A dozen states reportedly facing ATM cash crunch: Which states have been hit by the ATM cash crunch? Citing an analysis submitted by the RBI to the finance ministry Newstrack24x7.com first reported on Friday that in Bihar, Karnataka, Andhra Pradesh, Rajasthan, Maharashtra, Madhya Pradesh, Uttar Pradesh, and Telangana, the rate of cash withdrawal was much more than the deposits. This caused the cash crunch. Currency shortages were also reported in Punjab and Gujarat. Further, Chhattisgarh and Jammu and Kashmir also faced some cash crunch troubles.
Amid the currency shortages in various parts of the country, the government has decided to increase printing of Rs 500 denomination notes fivefold, said Economic Affairs Secretary Subhash Chandra Garg. “We have taken steps to increase the supply of currency in case the demand were to go up further,” said Garg, adding, “To give you an example, Rs 500 notes — we print about 5 billion of notes per day. We have taken steps to raise this production five times.”
Garg said that a “supply of about Rs 25 billion worth of Rs 500 notes per day” will be available “very soon”, adding that the supply would be about “Rs 700-750 billion” in a month. Garg assured that “these notes alone can more than meet the demand of any month”. ATM cash crunch to be resolved in 5-7 days: Financial Services Secretary Rajiv Kumar said that the ATM cash crunch in various parts of the country would be normalised in five to seven days. However, where does the supply of and demand for currency stand at present? According to the Ministry of Finance’s statement, the country has seen an unusual spurt in currency demand in the past three months. The statement added that this unusual spurt in demand was seen more in some parts of the country — Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, and Bihar.
Crop procurement, marriage season, FRDI Bill to blame for ATM cash crunch? Government officials have attributed the ATM cash crunch to crop procurement, the marriage season, and hoarding of high-denomination currency notes ahead of the Karnataka Assembly elections 2018. Further, officials said that the currency shortages originated in the southern states and might have been caused by rumours that money in banks is not safe due to a certain provision of the proposed Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, which has proposed a ‘bail-in’ clause to bail out stressed banks.
No further supply of Rs 2,000 notes for now, says Economic Affairs Secretary: While there are ATMs across the country that still cannot dispense the Rs 200 notes, the supply of Rs 2,000 notes might become scarce amid the cash crunch. Economic Affairs Secretary S C Garg said that there is no need for supplying Rs 2,000 notes “as it is in over supply”. Garg informed that the total worth of Rs 2,000 notes in the system is Rs 7 trillion (Rs 7 lakh crore), adding that this number “is huge and the supply of Rs 2,000 notes beyond this is not required”. He added that “Rs 2,000 notes are not being printed for the past few days”. (With Agency Inputs).
