Banknote shortage leaves India's cash machines without rupees

Ann Santiago
April 18, 2018

Since the amount of currency put out by the Reserve Bank of India (RBI) and government printing presses is adequate for normal transactions, bankers believe there is hoarding of the Rs 2,000 notes.

Former RBI deputy governor R. Gandhi has noted that based on pre-demonetisation trends - that is, if demonetisation had not taken place - India's currency in circulation should be close to Rs 23 lakh crore. In next couple of days, we will have supply of about 2500 crore of Rs 500 notes per day.

Less than 18 months after a ban on most of India's cash left millions of people scrambling for banknotes, some ATMs are once again running dry. "I have written to the Union Finance Minister to immediately make available Rs 20 crore in north Gujarat area so that farmers do not have to suffer more", he said. Attributing the cash crunch to procurement season, SBI chairman Rajnish Sinha told ANI, Maharashtra and Mumbai are facing no issues as far as SBI is concerned. Adding, "Where these notes of Rs 2,000 denomination are going, who are keeping them out of circulation? This unusual spurt in demand is seen more in some parts of the country like Andhra Pradesh, Telangana, Karnataka, MP and Bihar", it said.

What's causing the cash crunch and how can it be resolved?

The Economic Affairs Secretary Subhash Garg on Tuesday said that for meeting the additional demand of currency Rs 500 currency notes worth Rs 2,500 crore are being printed every day.

However, this time, reports say that the cash crunch was a knee-jerk reaction to the latest Financial Resolution and Deposit Insurance (FRDI) Bill, being tabled in parliament. Many customer also went to the bank branches but several bank officials said that the banks' infrastructure has been unable to handle the huge rush resulting in long serpentine queue.

Even in the national capital Delhi, people faced problems, and said "We are facing cash crunch". The central bank said it had sufficient cash in its vaults and currency chests. In these states, people are cutting bank and ATMs with cash, but they have to return home after being frustrated.

In a situation termed by Finance Minister Arun Jaitley as a "temporary shortage" of cash, ATMs across many states are reportedly running dry.

The news spread like wildfire among common people as well as politicians forcing financing minister Arun Jaitley to tweet, " Have reviewed the currency situation in the country. When demonetisation was announced in 2016, there was Rs 15.50 lakh crore in circulation in the market.

V. Balasubramanian, spokesperson for the ATM industry, said, "ATM service provider do a daily calculation of the cash required which is sent to banks in the night for the next day". He added that the temporary shortage of currency in some areas was being tackled. "The government will act tough on this", he said. Taking cognizance to the matter, Mos Finance SP Shukla said that government is aware of the issue and steady steps are taken by the Government.

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