New Delhi: Even as the government and Reserve Bank have asserted that there is no currency shortage, SBI Research on Wednesday pegged the cash shortfall in the system at a whopping Rs 70,000 crore, which is a third of the monthly withdrawals at ATMs.
“As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available,” the report added. It can be noted that in a statement, the RBI had on Tuesday attributed the shortage to “logistical issues” in both replenishing ATMs with cash and also recalibrating those to accommodate the Rs 200 notes.
The higher level of economic activity in the fourth quarter may have also resulted in more withdrawls at ATMs, the report said in the note.
The report also dismisses notions of the rising demand being due to proposals in the Financial Resolution and Deposit Insurance Bill, saying those were mooted over five months ago.
But it can be noted that the cash crunch originated in the Southern states, particularly in Andhra and Telangana last month following rumours that money in banks is not safe due to a certain provision in the proposed Financial Resolution and Deposit Insurance Bill 2017, finance ministry officials had said on Tuesday.
The most contentious part in the Bill is a suggestion to have a “bail-in” provision, which if incorporated result in cancellation of a liability on the part of the bank and can extend to bank deposits.
This Bill also seeks to set up a resolution corporation with powers relating to transfer of assets to a healthy financial firm, merger or amalgamation or liquidation. The proposed corporation will have power to use depositors money to save a failing bank.
The government tabled the Bill last August in the Lok Sabha, which was referred to a Joint Committee of Parliament. It was supposed to come up in the Winter Session that was a complete washout.
In a realted development, the government on Wednesday asked banks to ensure round-the-clock monitoring of ATMs and cash supply in all its branches. While there’s not much crisis in Delhi-NCR, the government claimed that the situation was improving in states hit by massive cash crunch.
The government expects at least 80 per cent of the ATMs to be functioning and dispensing cash from Thursday. Sources claimed that due to efforts of the government and banks, 76.2 per cent of the ATMs were made functional by Wednesday. Some 60 per cent of ATMs were functioning on Monday.
Finance ministry officials held video-conference with the heads of the state-run banks. Banks were asked to ensure more '500 notes were available at ATMs to deal with cash crunch.
Reports of cash shortages were coming from AP, Telengana, Madhya Pradesh, Bihar, Gujarat, Chhattisgarh and Jammu and Kashmir. India’s largest bank SBI said that cash availability at its ATMs has increased in the past 24 hours.
“Availability of cash in SBI ATM has improved in the last 24 hours. Efforts are being made on a continuous basis to improve the cash availability further in a few geographies. Overall issue of less cash should come to normalcy within earliest possible time,” said Neeraj Vyas, DMD (COO), SBI.
