Ghost of demonetisation haunts Government, RBI: Chidambaram

Cash crunch Bank unions threaten to launch nationwide agitation

Unusual spurt in currency demand in states like Uttar Pradesh, Madhya Pradesh, Andhra Pradesh as well as poll-bound Karnataka led to dry ATMs in several parts of the country, sending the government scrambling to make contingency plans to cover the deficit.

There is also a perception that there may be shortage of currency in the future. Mobile wallet companies including Paytm, Mobikwik and Flipkart-owned PhonePe today said they have seen a significant jump in digital transactions amid a recent currency shortage at ATMs and banks in some parts of the country. TMC MP Dinesh Trivedi has already expressed such an apprehension while the secretary in the Department of Economic Affairs in the Finance ministry Subhas Garg has admitted that printing of currency notes of this denomination has been halted for the last few days.

Images of shuttered ATMs and helpless citizens have been making the rounds on Indian media, reminiscent of the aftermath of Prime Minister Narendra Modi's shock announcement in 2016 banning 500- and 1,000-rupee notes. Each bank will have to furnish cash balances and ATM availability daily. Hotel owners and taxi operators in Uttarkashi, the main town near the Gangotri and Yamunotri shrines which opened on Wednesday, said inadequate availability of cash might spoil the first phase of the yatra season.

The RBI on Tuesday said that there is "sufficient cash" in its vaults and currency chests and it is "taking steps to move currency to areas" which have witnessed unusually large cash withdrawals. "RBI Kanpur and Lucknow offices have made enough cash available for currency chests of banks".

"This may have altered the demand for smaller denomination notes in a larger way to possibly substitute for the currency of larger denominations", it said.

To remedy the demand supply mismatch, the government has chose to speed up the printing of Rs 500 notes.

RBI in a statement on Monday attributed the shortage to "logistical issues" in both replenishing ATMs with cash and also recalibrating the ATMs to accommodate Rs 200 notes. But now the decision to re-calibrate the ATMs to fit the Rs 200 notes lies with banks. As banks are faced with fund crunch ATMs have gone dry creating a panic like situation as account holders' hop from one ATM to other. Government sources said on an average 10-12 per cent of ATMs at a given point of time remain under maintenance or closed and so now only a small number of ATMs are extraordinarly out of service. "With this, in a month RBI will be printing about Rs 70,000-Rs 75,000 crore".

"Is it correct that currency in circulation has increased by only 2.75 per cent since demonetization?"

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