New Delhi: Even as an unusual spurt in cash demand in Uttar Pradesh, Madhya Pradesh, Andhra Pradesh and poll-bound Karnataka led to ATMs going dry in several parts, the government said there is a pause in printing of Rs 2,000 notes for now.
“Rs 2000 note is not being printed for the past few days. What was required we have printed and put it in the system,” Department of Economic Affairs secretary Subhas Garg said on Tuesday. He, however, quickly added that this does not affect the overall supply of Rs 2,000 notes.
The government suspects Rs 2,000 notes were being hoarded and it plans to increase five-fold the printing of Rs 500 notes. The Reserve Bank of India (RBI) will increase five-fold the printing of Rs 500 notes worth about Rs 2,500 crore a day to deal with the cash shortage.
“So, in a month, we will be printing about Rs 70,000-Rs 75,000 crore. This should give you assurance that we are geared up to meet the rising demand,” Garg said.
ATMs of both public and private sector lenders in several cities were either not operating or showed no cash signs, a situation that officials insisted was not alarming and did not warrant panic.
Nevertheless, it reminded the public of the hard days of demonetisation in 2016. However, it was not sudden this time. For the last few weeks, southern states, including Telangana and Andhra Pradesh, were reporting ATMs going dry. By Tuesday, the shortage spread to Bihar, UP, Chhattisgarh, Gujarat, Delhi and Madhya Pradesh.
Sensing the gravity of the situation, Gard held a hurriedly called media conference.
The DEA secretary told the media that an “unusual spurt in demand is seen more in some parts of the country like AP, Telangana, Karnataka, MP and Bihar. There are reports of cash shortage from some parts of the country.”
“Rs 2,000 notes are circulating, but of late we have noticed there has been lesser inflow coming back in the circulation. We have not got this investigated, but you can assume this is the one note which is most suitable to hoard as this is a high value note. But this does not affect the overall supply of Rs 2,000 notes,” Garg said.
“There is no need for supplying Rs 2000 notes as it is in over supply. The total worth of Rs 2,000 notes in the system is Rs 7 lakh crore which is huge and the supply of Rs 2,000 note beyond this is not required. …. Besides, lower denominations notes are in over-supply,” he said.
The secretary said rumours were floating around suggesting currency shortage in the country but “the fact is otherwise.”
Usually, the currency supply every month used to be around Rs 20,000 crore but in the last two-three months, it has doubled to Rs 40,000-Rs 45,000 crore, he said, adding that in the first 13 days of April itself, there has been a demand of Rs 45,000 crore.
The cash crunch appeared to have mobilised the PMO into action. Top finance ministry officials -- Garg along with his two senior colleagues, revenue and finance secretary Hashmukh Adhia and DFS secretary Rajiv
Kumar -- are said to have briefed the PMO about the steps being taken to avoid any demonetisation hardships for the common man, sources said.Garg blamed the recent high demand for currency on multiple factors, including the tendency to hoard cash. He dismissed any comparison to the demonetisation situation.
“At the time of demonetisation, the currency in circulation was Rs 17.5 lakh crore and currency in circulation now is Rs 18 lakh crore. So, in absolute numbers, it is higher than the demonetisation. If we were growing at the rate prior to demonetisation, the currency in circulation would have been Rs 22-Rs 23 lakh crore,” he said.
Garg said there is absolutely no connection between so-called scams like Nirav Modi or FRDI Bill and cash shortage.
There are 4,000 chests across the country. In some chests there could be shortage, but the government is geared up to address the issues by currency movements. Some of the ATMS may have some problem, but these are temporary phenomena.
On a given day, 1 per cent of the ATMs are usually out of order. And it could be a local management issue, not countrywide phenomena, the DEA secretary said.
The key question of cash crunch just before a state election came again into picture with Karnataka polls just round the corner. But Garg was ready to reply: “Election is only happening in Karnataka, but this is beyond Karnataka.”
