Cash crunch: RBI, banks trade charges

A recent shortage of cash at ATMs in some parts of the country has put banks and the banking regulator at loggerheads with lenders citing supply shortages as the main problem and the central bank attributing logistical issues at banks as the prime reason.

While currency in circulation had been increasing steadily since January, bankers said distribution was skewed towards northern and eastern States.

“While there is adequate supply of currency in the Northern and Eastern part of the country, supply is not adequate in Western and Southern states,” said a senior official from a large private sector bank, who did not wish to be identified. “It is not possible for us to move the excess currency notes from one part of the country to another.”

According to RBI data, currency in circulation rose to Rs. 13.6 lakh crore as on April 7, from Rs. 12.45 lakh crore on March 10. While currency in circulation has rebounded, the pace of increase has slowed down since the last week of March.

Bankers said while the distribution of currency had earlier been skewed towards the poll-bound States, the situation had not corrected even after the elections had concluded.

“If our requirement is, say Rs. 50 crore from RBI on a particular day we don’t get more than 20%,” said the manager of a large branch of a state-run lender in Mumbai.

‘Manage logistics’

A senior central bank official, however, denied any curtailment of supply. “We are infusing money which is evident from the fact that currency in circulation numbers are increasing,” the official, who spoke on condition on anonymity, said. “Banks have to manage logistics properly,” the official said, adding it was possible banks were prioritising funds for branches and loading less at ATMs.

Another central banker admitted the Centre and RBI were concerned about the increase in cash withdrawals, given that a key aim of demonetisation was to encourage digital modes of payment. ATM cash withdrawals rose in February to Rs. 1.93 lakh crore from Rs. 1.52 lakh crore in January.