Panic grips as ATMs out of cash

In a throwback to the dark days of demonetisation, panic gripped the people as several automated teller machines (ATMs) on Tuesday “dried up” in many parts of the country. The cash crunch was reported in almost all cities, mostly in the States like Andhra Pradesh, Telangana, Madhya Pradesh, Bihar and even poll-bound Karnataka.

Even as people queued up before the ATMs to withdraw cash, the Government claimed that there is sufficient stock of currency available in the system and some ATMs were empty due to unusual spurt in demand in last three months.

Finance Minister Arun Jaitley said there is more than adequate currency in circulation, even as the Government blamed unusual demand for shortage in some areas. On the other hand, Economic Affairs Secretary Subhash Chandra Garg said the Government suspects that Rs 2,000 notes are being hoarded as they are not coming back into the circulation fast enough.

“We have reviewed the currency situation in the country. Overall 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 said in a tweet.

Congress president Rahul Gandhi said the “terror of note-ban” has again gripped the country due to reported shortage of cash in several States and accused Prime Minister Narendra Modi of destroying the country’s banking system with his demonetisation decision. The Congress chief, who is in his Parliamentary constituency Amethi, took to Twitter to attack Modi, alleging he “snatched” the Rs 500 and Rs 1,000 currency notes from every Indian’s pocket and “gave” it to Nirav Modi, but was neither speaking a word about it nor facing Parliament. “Modi ji has destroyed the banking system of the country,” Gandhi said on the reported cash crunch in some ATMs.

According to sources in the Finance Ministry, the Government has already directed the Reserve Bank of India (RBI) to take stock of the situation. “We need to solve these unwarranted problems as soon as possible. We have directed the Central bank to resolve the issue within 2-3 days,” said the sources.

“There has been unusual spurt in currency demand in the country in last three months,” Finance Ministry said.

The statement also said while currency supply increased by Rs 45,000 crore in the first 13 days of April, unusual spurt in demand was seen more in some parts of Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar. “The Government has set up State-wise committee and RBI has formed a committee to transfer currency from one State to other because for money transfer you need the permission of the RBI.

The shortage will be solved in 2-3 days.”

In a bid to ensure no-shortage of cash currency, the Government also swung into action immediately, saying that RBI will increase five-fold the printing of Rs 500 notes to deal with cash shortages in certain parts of the country, fuelled partly by hoarding of high denomination currency.

However, the RBI said there is no shortage of currency in the system even though it has ramped up printing of notes at its four presses. “There may be shortages in some pockets, largely due to logistical reason,” the RBI added.

Observing an unusually high demand for currency, Garg pointed out that there are multiple factors for this including tendency to hoard cash and it is stronger in some parts of the country. “There is also a perception that there may be shortage of currency in the future. So people have started withdrawing and it has contributed to the crisis,” he said.

When asked about the buzz that the cash shortage happened due to the recent scams in the banking sector, including one allegedly perpetrated by Nirav Modi or the Financial Resolution and Deposit Insurance (FRDI) Bill, Garg dismissed it, saying that the crunch may be in some States as they started distributing more cash benefits rather than otherwise. “Some psychological feeling why not keep some cash in pocket rather than keeping in banks. It has nothing to do with recent scams,” Garg said.

“We keep adequate stock of currency notes, which is one-sixth of the currency in circulation. Currently, the currency in stock is about Rs 2 lakh crore and the reserves are adequate to meet any unusual spurt in demand. The unusual spurt in currency demand since January was also met through reserves,” he added.

As per the RBI report, the currency in circulation in the country has reached the pre-demonetisation level of about Rs 17 lakh crore. “The Government of India with the RBI has 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,” the Finance Ministry said.

SBI Chairman Rajnish Kumar also said it would not be correct to state that there is a currency shortage in the country. “There has been an imbalance due to the crop procurement season, when demand for currency goes up. Punjab, Madhya Pradesh and Uttar Pradesh are seeing heightened demand due to procurement season,” Kumar added.