ATMs running dry in many states: Govt, RBI step in to get cash flowing

 ATMs running dry in many states: Govt, RBI step in to get cash flowing

PMO takes stock of situation; printing of Rs 500 notes to be increased five-fold; central bank to move currency to affected areas

The government and the Reserve Bank of India (RBI) have swung into action to address currency shortages in half a dozen states, caused by an increased demand due to ongoing crop procurement and the marriage season, besides non-functioning automated teller machines (ATMs).

The Prime Minister’s Office (PMO) on Tuesday held a meeting with Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar to take stock of the situation. Finance Minister Arun Jaitley described the cash crunch as “temporary” due to “unusual” demand in various parts of the country and said there was adequate supply of cash in the economy. Opposition leaders attacked the government, saying the “terror of note ban” had gripped the country and dubbed the situation as a “financial emergency”.

The RBI said there was no shortage of cash, and that logistical issues and a seasonal spurt in demand for cash were responsible for ATMs drying up in parts of the country. To meet the demand, the central bank has ramped up the printing of Rs 500 notes. “The shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway.

The RBI is closely monitoring both these aspects,” the central bank said, adding it was “also taking steps to move currency to areas that are witnessing unusually large cash withdrawals.”

Top government officials cited several factors for the sudden spurt in demand for cash, including agricultural and marriage seasons and fear among citizens in some states due to the Financial Resolution and Deposit Insurance (FRDI) Bill, which has proposed a ‘bail-in’ clause to bail out stressed banks.

Demonetisation 2.0 Opposition gives political currency to cash crunchThe uneven supply of currency notes by the RBI across states and hoarding of Rs 2,000 currency notes by citizens also contributed to the cash shortage.

Business Standard had first reported on Friday that in the states of Andhra Pradesh, Bihar, Karnataka, Maharashtra, Rajasthan, Uttar Pradesh, Madhya Pradesh and Telangana, the rate of cash withdrawal was much more than the deposits, leading to a cash crunch, according to an analysis submitted by the RBI to the finance ministry recently.

Senior bankers said it was a cash management issue and not actual dearth of currency. “Yes, this is a temporary situation, which is mainly due to geographical factors. There is one solution for it that a proper cash management system be maintained,” Rajnish Kumar, chairman, SBI, told a news agency.

The Business Standard, New Delhi, 18th  April 2018