Skip to main content

Centre, RBI step in as cash crunch hobbles ATMs across various states

Image
By
Centre, RBI step in as cash crunch hobbles ATMs across various states
Several states are facing cash shortage despite currency flow in the economy going back to the pre-demonetisation level
The finance ministry held a meeting with the Reserve Bank of India (RBI), banks, and state government officials on Thursday to take stock of cash availability in automated teller machines (ATMs) after receiving complaints of cash crunch in some states.
Several states are facing cash shortage despite currency flow in the economy going back to the pre-demonetisation level. A recent analysis by the RBI to the finance ministry found that the rate of cash withdrawal was far more than the cash deposits in banks in states such as Andhra Pradesh, Bihar, Karnataka, Maharashtra, Rajasthan, Uttar Pradesh, Madhya Pradesh, and Telangana, according to the documents reviewed by Business Standard.
“We held a meeting with the RBI officials, banks, and states today (Thursday). There is no apparent cash crunch across states. Bihar and Manipur are facing some issues. Banks have been advised to optimise cash flow at ATMs well,” said a senior finance ministry official. The official added that the cash crunch was largely restricted to a few states for various reasons, including mismanagement of cash flow by banks, recalibration of ATMs, and logistical issues.
A senior RBI official said there was no dearth of currency notes and the deficiency could have been caused by local demands responding to the ebb and flow of economic activities.
“During the harvest season (rabi), transactions go up. There are always some temporary mismatches. Whenever we get intimation from our currency chests that there is a shortage, we immediately replenish. The notes in circulation are now more than what they were before demonetisation. This currency shortage theory is incorrect,” said an official with the RBI.
The notes in circulation on November 4, 2016 - four days before the Union government announced demonetisation of Rs 500 and Rs 1,000 notes - were Rs 17.74 trillion. Currency notes in circulation are now at Rs 18.04 trillion. The economy has since grown, but the notes in circulation have not grown in tandem. This may explain the discrepancy, but factors such as local elections, too, play a crucial part in hoarding of currency and it is not abnormal to see a cash crunch before key elections.
ATMs dried up in north Bihar due to issues related to transportation of cash from currency chests located in other parts of the state, sources said, adding the situation will be under control in the next few days. Last week, the finance ministry directed banks to address the situation of cash shortage at ATMs in Varanasi – the constituency of Prime Minister Narendra Modi - a senior public sector bank (PSB) executive said.

The Department of Financial Services Secretary Rajiv Kumar held a meeting with bank executives last week to take stock of the cash crunch in Karnataka. “In Karnataka, there was a high rate of cash withdrawal in the recent days. There were bank holidays towards the end of March due to which ATMs were running dry for a short spell,” sources said.

“After the introduction of Rs 200 notes, there were also some issues related to recalibration of ATMs. Banks have been told to address the issue immediately,” a finance ministry official added.
 
Senior bank executives said there were signs that the banking network in Madhya Pradesh could face some pressure, adding that the cash crunch at ATMs had been reported in Bihar, Andhra Pradesh, and Telangana as well. Complaints have been reported from semi-urban and rural regions of the states. But Mumbai and Delhi have been largely insulated owing to the large size of currency chests.
 
“We are sending extra notes to areas reporting shortage from currency chests. But we cannot move currency notes overnight as it needs arrangement for securities, especially in remote areas,” a senior State Bank of India executive said.There is a spurt in demand for cash to make payments for agricultural activities as well. “We need to get more supplies of Rs 200 and Rs 500 notes. The RBI has assured us it will improve the supply,” said a head of retail banking with a mid-size PSB.

The  Business Standard, New Delhi, 13th April 2018

Comments

Post a Comment

Popular posts from this blog

Shrinking footprints of foreign banks in India

By
Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…
Post a Comment
Read more

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

By
GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…
2 comments
Read more

RBI rushes in to prop up falling rupee

By
RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…
Post a Comment
Read more