Sunday, 22 July, 2018


Cash crunch: Govt blames 'unusual demands', says nothing to worry

Cash crunch: Govt blames 'unusual demands', says nothing to worry Cash crunch: Govt blames 'unusual demands', says nothing to worry
Conrad Doyle | 18 April, 2018, 23:37

The government has made a decision to increase the production of currency notes by five times, reported the Indian Express.

A Finance Ministry official said that 76 per cent of the 2.2 lakh ATMs across the country were functioning normally on April 16. "The temporary shortage caused by "sudden and unusual increase" in some areas is being tackled quickly", Jaitley tweeted.

According to the RBI data released in March this year, currency with the public stood at Rs 17.06 lakh crore as on 18 February as against Rs 17.01 lakh crore seen on October 28, 2016.

On paper, the total worth of Rs 2,000 notes in circulation as of today is Rs 6.7 lakh crore. He attributed it to the huge demand in the last three months. To combat the high demand, the plan is to increase the supply of cash into the entire baking system but no timelines have been given by the government. If we compare, then Rs 7,140 crore was the cash demand previous fortnight, and Rs 33,000 crore before that. To give you an example, Rs 500 notes - we print about 500 crore of notes per day. "It has nothing to do with recent scams", Garg said.

The finance ministry did not explain the sudden increase in demand for cash, and did not immediately respond to a request for additional comment. Spurt in demand An unusual spurt in currency demand in states like Uttar Pradesh, Madhya Pradesh, Andhra Pradesh as well as poll-bound Karnataka led to dry ATMs in several parts of the country, sending the government scrambling to make contingency plans to cover the deficit. Now, similar reports are coming from eastern Maharashtra, Bihar and Gujarat as well.

The government with the Reserve Bank of India has taken all steps to meet this unusual demand.

Cash crunch: Govt blames 'unusual demands', says nothing to worry

The RBI yesterday said that the shortages in some pockets might be due to the logistics of replenishing ATMs and that the recalibration of machines was underway. "RBI is closely monitoring both these aspects" the central bank said.

An official at the currency chest in Patna, however, denied there was any cash crunch. "People involved in cumin trade are helpless as most of their transactions are in cash", he said. "In the next week, things will start coming back to normal".

The people on the streets, however, had a common reaction: "It seems like the note ban has returned to haunt us". But this does not affect the overall supply of Rs 2,000 notes.

Previously, SBI chairman Rajnish Kumar had said, "We are reviewing the situation constantly". One reason for the spurt in demand was the different festivals observed by people in nearly every states like Baisakhi, Bihu and others marking the solar new year.

Some ATMs downed shutters with No cash and Out of service messages, prompting the government to move currency from surplus regions. "Hoarding of notes has also added to the problem", he said.

Also, steps are being taken to ensure that ATMs are supplied with cash and non-functional ATMs normalized at the earliest. "If the situation continues for another week we fear for the safety of bank employees" in affected states, he said. Is there a Financial Emergency going on in the country? Rahul Gandhi accused Prime Minister Modi of destroying India's banking system by announcing demonetisation. The outsourcing agency however has maintained that cash in ATMs is based on currency allotted by banks.

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