Commenting on the cash crunch reported from different parts of India, former Finance Minister P. Chidambaram said it could be a sign of “loss of confidence” in the banking system because of the bank scams and claimed that the “ghosts of demonetisation has come back to haunt” the government and the RBI.
Finance Ministry sources said the situation had improved with better coordination with the RBI and the cash logistics companies that feed currency into ATMs.
Ministry collects data
Government sources said close to 80% of the two lakh ATM machines were dispensing cash on Wednesday to substantially ease the situation. Sources in the Finance Ministry said that it had also “started collecting data of cash withdrawals to examine if there is a pattern to them.”
“I suspect ordinary people are withdrawing cash and not putting back into banks their surplus cash. It is possible that there is some loss of confidence in the banking system, thanks to the bank scams,” Mr. Chidambaram said as he diagnosed the cash situation in a series of tweets.
“The ghost of demonetisation has come back to haunt the Govt/RBI. Why are ATMs still being re-calibrated even 17 months after demonetisation? After demonetising 500 and 1000 rupee notes, Govt printed Rs 2000 notes! Now, Govt is complaining that Rs 2000 notes are being hoarded!! We always knew that Rs 2000 notes were printed only to help hoarders,” he said.
While several theories are doing the rounds on what caused the crunch – from harvest festivals on April 13 to crop procurement to the need for cash for the impending elections in Karnataka – the shortage of ₹2000 notes seem to indicate that people may be stocking up cash.
SBI research
Also, SBI Research pointed out that cash withdrawals in the second half of the financial year 2017-18 was 12.2% higher over the previous six months. It put the shortfall in cash by ₹70,000 crore.
In the past couple of months, States that have seen a spike in demand for cash include Andhra Pradesh, Telangana, Uttar Pradesh, Madhya Pradesh, Bihar, Gujarat, Bengal , Delhi and poll-bound Karnataka.
“Sir, with due respect the cash shortage in Banks & ATMs is neither sudden nor temporary. I’ve been hearing complaints for over 3 months repeatedly in Hyderabad. Pls have RBI & Fin Min team dig deeper & not brush away an issue that is eroding people’s confidence in banking system,” tweeted K.T. Rama Rao, Telangana’s Minister of Information Technology.
Mr. Chidambaram blamed the RBI of miscalculating the cash situation to deal with the post-harvest season. “I also suspect that RBI seriously miscalculated demand for cash in the post-harvest season. Is it correct that currency in circulation has increased by only 2.75% since demonetisation? If so, I maintain that Govt/RBI are not allowing money supply to grow at the same rate as the nominal GDP,” he said.
