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With the public searching for a reason for the cash crunch, the government attributed it to an “unusual spurt in currency demand”. But there is no official explanation for this spurt.
Several bank officials said a lot of 2,000-rupee notes were not coming back to banks, leading to speculation that they were going into the black economy, perhaps as they take less space to stock and are easier to transport. One theory doing the rounds is that cash is being hoarded by political parties and their supporters in the run-up to the Karnataka elections next month.
While finance minister Arun Jaitley said there was a “sudden and unusual increase” in demand in some parts of the country, the opposition lost no time in latching on to the issue with P Chidambaram saying supply had been “arbitrarily reduced”. His party chief Rahul Gandhi linked the problem to the Nirav Modi fraud and demonetisation.
The government said currency supply had risen to Rs 45,000 crore during the first 13 days of April — from Rs 7,140 crore in the previous fortnight and Rs 33,000 crore in the comparable period prior to that. ATM operators and government officials said that on an average, over Rs 10,000 crore was being placed in ATMs every day, compared to Rs 6,000-7,000 crore before demonetisation — which suggests that despite the push to go digital, the appetite for cash remains undimmed.
The use of Rs 2,000 notes, in particular, is seen to be causing the problem. “Cash withdrawal from ATMs has witnessed continuous escalation post-demonetisation. Daily ATM transaction volume is now at par or greater than the pre-demonetisation period. Amount withdrawn per ATM withdrawal is also on the rise,” said Rituraj Sinha, MD of cash logistics company SIS, adding that the problem was confined to a few regions.
The shortage first emerged in Andhra and Telangana — home to some of the country’s biggest contractors, and contractors, it is often said, like cash. The shortage gradually spread to some other parts of the country with MP CM Shivraj Singh Chauhan acknowledging the problem on Monday. Bihar deputy CM Sushil Modi said the state was facing a cash crunch for six days.
“The RBI said there was a shortage of supply of currency notes, due to which the cash crunch occurred. But they have assured us that the problem will be resolved in the next day or two,” he said. Gujarat deputy CM Nitin Patel, who is also finance minister, acknowledged that banks were facing a cash crunch and said the government was in touch with the RBI. RBI, however, maintained there was no shortage of cash. “It is clarified… there is sufficient cash in the RBI vaults and currency chests.
Nevertheless, printing of the notes has been ramped up in all the four note presses. The shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still under way…,” it said in a statement on Tuesday. Economic affairs secretary Subhash Chandra Garg said the printing of Rs 500 notes would be stepped up five-fold to around Rs 2,500 crore a day to deal with the shortage. “So, in a month, we will be printing about Rs Rs 75,000 crore. This should give you assurance we are geared up,” he said.