Andhra & Telangana get highest cash inflows, yet there is an acute shortage of currency

HYDERABAD: Where is the money going in the two Telugu states? Reserve Bank of India data between April 2017 and February 2018 shows Rs 51,523 crore was supplied to Hyderabad office of RBI, the highest among all RBI offices in the country. Similarly between November 2016 and March 2017, Rs 82,168 crore was pumped into Hyderabad office of RBI — again the highest among all RBI offices in the country.


Despite huge cash inflow, there is still a severe crunch at banks and ATMs in Andhra and Telangana. Both states governments have written to RBI to pump in more cash. Banking experts say this could be due to various reasons, including fears among customers that their deposits may be used for bail-ins of banks under Financial Resolution and Deposit Insurance (FRDI) Bill. And this triggered massive withdrawals in the two states.

FRDI Bill aimed at limiting the fallout of failure of institutions like banks has a bail-in clause wherein depositors will have to bear a part of the resolution cost by a corresponding reduction in claims. This resulted in fears among depositors.

Union Government clarified the bail-in clause would not be used for public sector banks and insured deposits cannot be used in case of bail-in and cancellation of liability of a depositor beyond insured amount will be possible only with the prior consent of the depositor. Despite clarifications, apprehensions and fears exist among depositors.

Medak MP Kotha Prabhakar Reddy of TRS and Kadapa MP YS Avinash Reddy of YSRCP raised the issue of shortage of currency in banks in Lok Sabha on March 16 to which Union finance ministry said Hyderabad RBI tops the country on cash supplies.

In a written reply, the finance ministry said, “Reserve Bank of India apprised that currency supplies across country are regularly monitored and adequate supplies made to RBI issuing offices. Banks take corrective measures, in consultation with RBI in case of currency crunch. RBI has apprised that on receipt of a letter dated February 14, 2018, from AP government, requesting for Rs 5,000 crore currency, fresh currency of Rs 5,000 crore was dispatched to Hyderabad office of RBI with instructions to ensure appropriate distribution among currency chests in circles so that cases of shortage at specific places do not arise.”

Telangana finance minister Etala Rajender said, “The crunch is due inadequate supply of currency by RBI, reduction in cash inflow from the public, high demand for higher denomination notes. ATMs were going dry and banks are also not giving cash. RBI officials are saying cash going out of banks is not coming back in Telangana and Andhra.”