Millennium Post

Defusing the panic

Tuesday brought a throwback to the immediate impact of the bold nation-wide event of November 8, 2017. The first thirteen days of April saw an increase in currency supply by Rs 45,000 crores. This unusual spurt in demand comes particularly from Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, and Bihar. It is reported that ATMs in most parts of the country are running out of cash and do not function. While sources in the Finance Ministry confirm that cash crunch is not alarming and that there is no need to panic, the Reserve Bank of India (RBI) has said there is no currency shortage and added that there is sufficient cash in the Central bank's vaults and currency chests. The RBI statement said that "it has been reported in a section of the media that there is a shortage of currency in certain parts of the country. It is clarified at the outset that there is sufficient cash in the RBI vaults and currency chests". It added further that printing of currency notes has been ramped up in all the four note printing presses. RBI explained the situation that "the shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway. RBI is closely monitoring both these aspects". Finance Minister Arun Jaitley has assured through a tweet that there is more than adequate currency in circulation and also plenty available with the banks. He blamed "sudden and unusual increase" in cash withdrawal for the situation, and that "we have cash currency of Rs 1,25,000 crore right now. There is one problem that some states have less currency and others have more. A panel has been formed and the matter will be fixed in three days".
It is analysed that the currency problem originated in the southern states and spread over to other states due to a set of suspected reasons: the proposed Financial Resolution and Deposit Insurance Bill, 2017 sparked a rumour that money would not be safe in banks if the Bill became a law, and that compounded by big bank loan scams and diminishing faith in the banking system is speculated to have driven people to withdraw huge amounts of cash. This bank run in parts of Andhra Pradesh and Telangana was spurred due to the fear that banks might collapse under pressure from the aforementioned reasons. This fear relayed to other states and the sudden bank run in different places has contributed to the largely appearing threat of sudden cash crunch. While the government has been prompt in allaying fears and addressing this situation, it is the lurking fear from post-demonetisation days of severe shortage of disposable money which had thrown the everyday lives of common people out of gear.
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