Localised currency shortages in some states have dominated the headlines. Media reports across all platforms have highlighted the shortages in Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Telangana, Karnataka, Gujarat and parts of Bihar and there have been panic withdrawals of cash in other states as well following this.

The banking system has been vulnerable and faced with credibility issues in the light of the infamous Punjab National Bank scam involving Nirav Modi that touched a colossal $2 billion. Considered against this backdrop, the sudden non-availability of cash appears to have shaken the confidence of the ‘aam aadmi’ in banks.

Of course, sensational reports on the return of the ‘dark days of demonetisation’, suggesting a possible nationwide cash crunch, could have also contributed to the confusion over cash availability. Besides, political opponents have dipped into this mood triggered by social media that continues to go unregulated in terms of content.

Restraint in reporting forms a key keg in the governance of the economy. That said, it also needs to be asserted that self-restraint in reporting may perhaps be a better option than a clamp down on the media on flimsy grounds.

While opposition parties led by the Congress party quickly swung in to make political capital on the currency shortages, there is no denying that ATMs in some states have gone without cash for a few days. In Andhra Pradesh, for instance, ATMs in several cities have been shut down for months.

Interestingly, poll-bound Karnataka has become the fifth state to report currency shortages. Non-availability of ready cash has been reported even though currency in circulation was Rs 18.29 lakh crore and much more than Rs 17.89 lakh crore before demonetisation in November 2016.

The Reserve Bank of India (RBI) and the Finance ministry, however, will have to come up with a more plausible explanation for the currency shortages in some cities. The State Bank of India (SBI) analysis in this regard stands out amidst the confusion. Income velocity, that reflects currency with the public, seems to have been on the decline in the last financial year, especially the last six months. This may have resulted in the higher denomination Rs 2,000 notes not getting adequately circulated.

Even though state-wise income velocity could hardly be determined, the SBI suggested that in Bihar, Gujarat and the southern states, this was far less than the national average. Other states may have been sucked into the ‘domino effect’ of currency shortage. The steep rise in ATM withdrawals at 12.2 per cent during the final six months of the last financial year seems much higher than the corresponding months of 2015-16 or 2014-15.

This may have also been a factor in the cash shortage. Cash withdrawals breached the five-year average of 8.2 per cent for the 2012-16 period. The mystery of huge cash withdrawals or the missing cash at ATMs needs an in-depth analysis and swift action.

Meanwhile, all concerned should refrain from fanning panic as it serves nobody’s interest.