ATMs are running dry again in many states in the country, almost a year and half after the government announced demonetisation.
Finance Minister Arun Jaitley said "there is more than adequate currency in circulation and also available with the banks." The RBI formed a committee Tuesday to ensure the re-flow of cash at the earliest
"The temporary shortage caused by ‘sudden and unusual increase’ in some areas is being tackled quickly," Jaitley said.
"The Govt continues to have in stock adequate currency notes of all denominations, including of Rs.500, 200 and Rs.100 to meet any demand. The Government would like to assure all the people that there have been adequate supply of currency notes which have met entire demand so far," said a tweet by the Ministry of Finance.
"The Government of India with the Reserve Bank of India have taken all steps to meet this unusual demand. We had adequate reserves of currency notes which have been used to meet fully the extraordinary demand generated so far."
With non-availability of cash in ATMs, people from Varanasi, Delhi, Madhya Pradesh, Karanataka and other states are facing problems. Many are not able to purchase groceries, which is usually a cash transaction.
"We do not know what or where the problem is but the common man is facing difficulty as the ATM Kiosks are not dispensing cash. We have visited 5-6 ATMs since morning. We need to pay for the admission of children and purchase groceries & vegetables," people from Varanasi said.
Rajnish Kumar, SBI Chairman told news agency ANI it is a 'temporary situation'.
"One reason (for cash crunch) is that procurement season has come and the payment to farmers have gone up...In the next week, things will start coming back to normalcy. There is a department which monitors situations like this. This is not new. RBI has been given an indent to increase the flow of Rs 500 notes in the system," he said adding that the shortage of currency is due to 'geographical factors'.
The department of Economic Affairs has assured the matter will be resolved soon with the raise in production of Rs 500 notes.
The Reserve Bank of India (RBI) may either be holding back Rs 2,000 notes or could have stopped printing high denomination currency, an SBI Research report published last year had said.
"We print about 500 cr of Rs 500 notes per day. We have taken steps to raise this production 5 times. In next couple of days, we'll have supply of about 2500 cr of Rs 500 notes per day. In a month, supply would be about 70000-75000 cr," SC Garg, Secy, Dept of Economic Affairs said.
According to a report by the Economics Times, a provision in the Financial Resolution and Deposit Insurance (FRDI) Bill fuelled rumours that money in the banks will not remain safe, due to which people began withdrawing money in large numbers and hoarding them. This contributed to the present situation.
A cash crunch on one hand and a software glitch on the other has also resulted in freezing of bill payments running into thousands of crores of rupees in Andhra Pradesh, for over a month now.
The non-release of funds by the Centre is being cited as one reason for the cash crunch.
In all, payments worth Rs 8,000 crore have been stalled "for various reasons," officials said.
Kerala faces a similar problem. The state government has said that salary and pension distribution to its employees was likely to be affected due to shortage of currency in treasuries. Finance Minister T M Thomas Issac said that even though government has funds for the disbursement of salary and pension for the month of April, its distribution was likely to affected as RBI has not supplied enough notes.
The Finance Ministry held a meeting with the RBI, banks, and state governments last Thursday to take cognizance of the matter. The RBI had denied reports on currency shortage and attributed the cash crunch to increasing number of transactions ahead of harvest season.
Cash crunch in ATMs could also be the result of a slowdown in deposit growth.
"A recent analysis by the RBI to the finance ministry found that the rate of cash withdrawal was far more than the cash deposits in banks in states such as Andhra Pradesh, Bihar, Karnataka, Maharashtra, Rajasthan, Uttar Pradesh, Madhya Pradesh, and Telangana, " according to the documents reviewed by Business Standard
"During the year ended March 2018, bank deposits grew by a measly 6.7% compared to 15.3% in 2016-17. During the same period, bank credit grew 10.3% compared to 8.2% in the comparable period in the previous year," said a report by the Times Of India.
The shortage of currency has spread to states like Maharashtra, Bihar and Gujarat, despite the currency in circulation crossing the pre-demonetisation level.
Madhya Pradesh Chief Minister Shivraj Singh Chouhan seems to think it is a conspiracy to malign the government.
"The currency worth Rs 15,00,000 crore was in circulation before demonetisation. After this exercise (demonetisation), the currency in circulation increased to Rs 16,50,000 crore. But notes of Rs 2,000 are missing from the market," he said.
"Where these notes of Rs 2,000 denomination are going, who are keeping them out of circulation? Who are the persons creating shortfall of cash? This is a conspiracy to create problems. The government will act tough on this,"
Citing RBI data, the TOI report said currency in circulation as on April 6 was Rs 18.17 lakh crore, which is close to the number at the time of demonetisation. The demand for currency notes, the report adds, has gone down with increase in digitisation.
On November 8, 2016, the government had demonetised large denomination currency notes of Rs 500 and 1,000 in a bid to counter black money, counterfeit notes and funding of terror. 86 per cent of the currency was removed from circulation in one go, triggering widespread shortage in cash flow. The government has since promoted digitisation, instead of cash transactions.
(Inputs from agencies)