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Adequate currency in circulation, shortage temporary says FM Arun Jaitley

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NEW DELHI: Assuaging concerns over currency shortage in ATMs (Automated Teller Machines), finance minister Arun Jaitley on Tuesday said there is more than adequate currency in circulation and the same is available with banks. Jaitley took to micro-blogging site Twitter and said that the shortage is ‘temporary’ and that it has been caused due to ‘sudden and unusual increase’ (in demand) in some parts of the country.

Earlier on Monday, there were complaints of cash shortage in eastern Maharashtra, Bihar and Gujarat. This was almost a month after ATMs in Andhra Pradesh and Telangana had run dry.

Since Tuesday morning, similar reports started emerging from different parts of the country, following which the finance minister issued the statement.

According to RBI data, currency in circulation as on April 6 was Rs 18.17 lakh crore, which is close to the number at the time of demonetisation. While the growth in currency has been almost flat (compared to the day before demonetisation), the need for currency has shrunk considerably because of the high level of digitisation.

Since the amount of currency put out by the Reserve Bank of India (RBI) and government printing presses is adequate for normal transactions, bankers believe there is hoarding of the Rs 2,000 notes. Nearly Rs 5 lakh crore worth of Rs 2,000 notes were printed after demonetisation.

When the cash shortfall was reported from Andhra Pradesh and Telangana in March, it was attributed by some to a misunderstanding of the Financial Resolution and Deposit Insurance Bill, which had a ‘bail in’ clause where depositors would bear a portion of any losses. This purportedly triggered withdrawals from banks.

Bankers point out that currency in circulation typically peaks just before an election. But the only state going for elections in the coming weeks is Karnataka.

The demand for currency is also reflected in the slowdown in deposit growth. During the year ended March 2018, bank deposits grew by a measly 6.7% compared to 15.3% in 2016-17. During the same period, bank credit grew 10.3% compared to 8.2% in the comparable period in the previous year.

Updated: April 17, 2018 — 6:44 am

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