Cash crunch ghost returns to haunt cities and towns across country
The country once again is reeling under the fear of severe cash crisis as ATMs in states like Telangana, Andhra Pradesh, Bihar, Karnataka, Gujarat, eastern Maharashtra and Madhya Pradesh go dry. There have been reports of non-availability of cash in some parts of Delhi-NCR too.
As always, the recent cash shortage has thrown life out of gear. The common man is facing difficulty, as the ATM Kiosks are not dispensing cash. Chaotic scenes, massive lines at banks, large numbers of frantic ATM users queuing outside vending machines sine early Tuesday morning became routine as the ATMs either continued to remain out of service or had a board notifying “no cash”. People have been relying on card payments to shop, but those living in rural areas do not have this option because most stores do not have access to card-payment systems. Angry over cash non-availability, people shouted slogans and blamed the Prime Minister Narendra Modi of destroying the country’s banking system with his demonetisation decision. Bankers also are reportedly not getting the full indent from the Reserve Bank of India (RBI) and hence they are unable to meet the demand of ATMs.
To recap, cash crunch has returned to the Indian system for the second time in 18 months. Hence, rumours mills are in overdrive that the cash shortage this time is not due to any note ban but related to the recent frauds in the banking sector, including one allegedly perpetrated by Nirav Modi or the Financial Resolution and Deposit Insurance (FRDI) Bill.
So why is India actually facing a cash crunch a year and a half after demonetisation?
PM Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 notes to tackle black money in the economy in the year 2016. Following this move, RBI introduced Rs 2,000 notes to ensure more currency reaches people in a short span. Rs 2,000 notes do kept circulating but of late, there has been lesser inflow coming back in the circulation. In short, one can assume that the hoarding Rs. 2000 notes can be one of the possible reasons that has led to cash crunch, as it is the one high value note, which is most suitable to hoard. The Centre too, released an official statement where it clearly stated that the grim situation is a result of “unusual spurt” in demand for cash. According to the government, the demand for cash has gone up from the monthly average of Rs 19,000-20,000 crore in the country to about Rs 40,000-45,000 crore per month, in the first 13 days of April itself. Other possible theories/reasons for this sudden crunch could be:
- The lack of higher denomination currency notes needed to pay harvest season wages.
- An official statistics accessed by NDTV has indicated a spike in cash withdrawals from banks over the last fortnight that people did not deposit into the banking sector has contributed to the cash crunch faced in several parts of the country. This increase, finance ministry officials said, had led to a mismatch between the availability of cash and demand in several parts of the country.
- There have been issues with the raw materials like ink and paper for some time now, which has restricted currency supplies to banks.
- The recalibration of ATM machines to dispense 200-rupee currency notes is yet to be completed in many of the states mentioned above.
With the cash crunch back in business, The Centre said it is taking all steps to ensure that ATMs are supplied with cash and to get non-functional ATMs normalised at the earliest. In an official statement released by his government, Finance Minister Arun Jaitley said that temporary shortage in certain states is being taken care of quickly and ensured the citizens that there is more than adequate currency in circulation. In addition, to meet the unprecedented demand, the government is planning to make every effort to increase the supply of cash in the banking system. The RBI, which used to Rs 500 crore to Rs 2,500 crore worth of 500-rupee notes every day, will now be printing Rs 70,000 to Rs 75,000 crores to meet the rising demand.
As the terror of note ban once again gripped the country, the Opposition left no stone unturned to attack the Modi government over the current crisis. Telangana minister KT Rama Rao, disagreeing with Arun Jaitley over the cash crunch remarked that the cash shortage was neither sudden nor temporary. He added that he has been hearing complaints regarding cash shortages and the ATMs going dry for over 3 months repeatedly in Hyderabad. He requested RBI and finance minister to dig deeper and not brush away an issue that is eroding people’s confidence in banking system.
Did you face any problems at an ATM today? Let me know, where. We are trying to verify if the situation is back to normal. #cashcrunch
— Faye DSouza (@fayedsouza) April 18, 2018
Over a year after demonetisation, we have yet another #CashCrunch. ATMs across the country have run out of money! What’s going on?
— Jyotiraditya Scindia (@JM_Scindia) April 17, 2018
As ATMs across the country bleed dry, it appears like the ghost of Modi Govt's demonetisation has returned to haunt the country. Who is to blame for this financial turmoil? #CashCrunch pic.twitter.com/bwBx2IxCth
— Congress (@INCIndia) April 17, 2018
Amid cash crunch, ANI reported that one person was arrested and a case registered in Belagavi after the Karnataka police seized fake Indian currency notes with the face value of Rs 7 crore. On the other hand, in a statement given to PTI, a spokesperson said that Jammu and Kashmir Bank with the timely support of Jammu Regional Office of Reserve Bank of India (RBI) has restored sufficient cash supply in the Kashmir Valley, wherein most of the states in India are facing cash crunch and chain of ATMs stand cash starved.
As of now, ATMs in some parts of the country continued to remain out of cash today. In cities of Uttar Pradesh, Bihar, Andhra Pradesh, Maharashtra and Karnataka, the ATMs were either not operating or showed no cash signs. Some ATMs in the national capital too were reported to be out of service.
The government on its part has claimed that the situation was fast improving with over 80 percent of 2.2 lakh ATMs operating normally today as against 60 percent yesterday, as reported by PTI. Moreover, the cash crunch in various parts of the country will be normalised in five to seven days.
While you struggle to manage with no or little cash, we suggest few alternatives to minimise the trouble you may be facing to some extent:
- Instead of hard cash, make use of credit and debit cards to eliminate the need for cash in day to day transactions.
- Rely more on online payment methods like net banking and mobile banking.
- Mobile wallet systems to pay small bills is a good idea especially during cash crunch.
- Don’t overshoot your budget. Plan and spend accordingly to save more.
Hope these tips would help minimise all your worries to some extent. Lastly, we at Viral statements believe the inconvenience caused to the public outweighs any potential benefits, no matter how bigger that goal is!