With reports of cash shortage in banks and ATMs running dry or becoming non-functional in some states making headlines, the Reserve Bank of India Tuesday formed a committee to tide over the crisis. Union Finance Minister Arun Jaitley blamed the “temporary shortage” of cash on the “sudden and unusual increase” in withdrawals in some areas. “Have reviewed the currency situation in the country. Over all there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by ‘sudden and unusual increase’ in some areas is being tackled quickly,” Jaitley tweeted.
Despite the currency flow going back to the pre-demonetisation levels, people are facing difficulty in withdrawing cash from ATMs. Minister of State for Finance, SP Shukla said that the cash shortage was due to some states having low currency reserves in comparison to others. He said the government has set up a state-wise committee to oversee the transfer of excess currency between the states. The issue will be resolved in three days, he added.
“We’ve cash currency of Rs 1,25,000 cr right now. There is one problem that some states have less currency and others have more. The government has formed a state-wise committee and RBI also formed a committee to transfer currency from one state to other. It will be done in 3 days,” he was quoted as saying.
Congress President Rahul Gandhi, reacting to the reports, blamed Prime Minister Narendra Modi for “destroying” the banking system. “Modi Ji has destroyed the banking system. Nirav Modi fled with Rs 30,000 crore and PM didn’t utter a word. We were forced to stand in queues as he snatched 500-1000 rupee notes from our pockets and put in Nirav Modi’s pocket,” Rahul Gandhi told ANI.
Among the worst affected states are Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar, the Finance Ministry said in a statement. “There has been unusual spurt in currency demand in the country in last three months. In the current month, in the first 13 days itself, the currency supply increased by Rs.45000 crores. This unusual spurt in demand is seen more in some parts of the country like Andhra Pradesh, Telangana, Karnataka, MP and Bihar. 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,” it said.
The Indian Express reported earlier this month that rumours that the Financial Resolution and Deposit Insurance (FRDI) Bill, proposed last June, will cause losses to depositors in case a bank goes bankrupt has allegedly led to heavy withdrawals. Bank officials said that people have been withdrawing cash more than they require at the beginning of the month. They blamed the cash shortage over fewer deposits and more withdrawals.
“People are withdrawing money even if they do not need it and keeping it with them. Cash is not coming back into the banking system,” State Bank of India (SBI) regional manager, Visakhapatnam, H Purnima, said. Stating that this is a phenomenon experienced by “all banks” since November 2017, Purnima said, “We are unable to refill ATMs because people are not depositing in banks.”
Some bank officials also believe the RBI has deliberately reduced cash supply to banks to force people to make digital payments and increase cashless transactions.
On Monday, Madhya Pradesh Chief Minister Shivraj Singh Chauhan claimed there was a conspiracy behind Rs 2000 notes disappearing from the market. Referring to reports of ATMs running out of cash at some places in the state, he said: “The currency worth Rs. 15,00,000 crore was in circulation before demonetisation. After the demonetisation exercise, the currency in circulation increased to Rs. 16,50,000 crore. But notes of Rs. 2,000 are missing from the market. 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.”
A bank customer trying to withdraw cash from an ATM in Bhopal complained that the situation has been the same since last 15 days. “We are facing a cash crunch. ATMs are not dispensing cash. The situation has been the same since 15 days. We have visited several ATMs today as well, to no avail,” he told ANI.
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