As ATMs run dry, govt goes into damage control, RBI blames 'logistical issues'

 The delay in recalibration of cash vending machines to dispense Rs 200 notes is understood to be one of the reasons for the currency shortage in some parts of the country.

Following the introduction of Rs 200 notes by the RBI, it was decided that recalibration of ATMs (automated teller machines) for new notes would be done at a faster pace, sources said, adding the drive was soon started but got delayed in some parts of the country. The RBI said shortage "may be felt" in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway.  Meanwhile, the printing of Rs 2,000 notes has also been halted for a past few days.

"There is no need for supplying Rs 2,000 notes as it is in over supply. The total worth of Rs 2,000 notes in the system is Rs 7 lakh crore in the system. This Rs 7 lakh crore number is huge and the supply of Rs 2,000 notes beyond this is not required. Rs 2,000 notes are not being printed for the past few days," Economic Affairs Secretary S C Garg said earlier in the day."What was required we have printed and put it in the system. Besides lower denomination currency notes are in over-supply," he added.

Commenting on this, cash logistics company SIS Prosgur Managing Director Rituraj Sinha said cash withdrawal from ATMs has witnessed continuous escalation post demonetization. "Daily ATM transaction volume is now at par or greater than pre-demonetization period. Amount withdrawn per ATM has also been on the rise. To facilitate currency velocity, recalibration of ATMs to dispense Rs 200 denomination (notes)is progressing rapidly," Sinha said.
Asked by when the situation would become normal, Garg said, the situation is not out of control and it is very much normal.

"The situation will stabilise once demand normalises... Supply of currency will also reduce. So it is function of demand and supply," he said.On being asked if polls in some states are the reason for the shortage, Garg said elections are only happening in Karnataka and but this is beyond that state. He further said some of the ATMs may have some problem, but these are temporary phenomena.  "On a given day, one per cent of the ATMs are usually out of order. And it could be a local management issue not a countrywide phenomena," he added. Unusual spurt in demand for currency led to many ATMs and banks running out of cash in Uttar Pradesh, Madhya Pradesh, poll-bound Karnataka and some other states even as the government and the RBI assured the public that there was no currency shortage. Suspected hoarding of Rs 2,000 notes was cited as a reason by the government for the current situation. On the other hand, the RBI said logistics and recalibration issues were limiting replenishments of ATMs.

Amid reports of currency shortages, the government said printing of Rs 500 denomination notes would be increased five-fold and notes worth Rs 70,000-75,000 crore would be printed in a month while the RBI has ramped up printing at its notes presses.

Seeking to assure the public, Finance Minister Arun Jaitley said he has reviewed the situation and the government would fix the problem quickly.   "Overall there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by 'sudden and unusual increase' (in demand) in some areas is being tackled quickly," Jaitley , who has been away from office since April 2 due to a kidney ailment, said in a tweet.
Government officials attributed the cash crunch to crop procurement and hoarding of high denomination currency ahead of elections in Karnataka.

The currency problem originated in the southern states and may have been fuelled by rumours that money in banks is not safe due to a certain provision in the proposed Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, officials said. Cities and towns across Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Uttar Pradesh were among those impacted by the cash crunch. Some ATMs downed shutters with 'No cash' and 'Out of service' messages, prompting the government to move currency from surplus regions. Some ATMs in national capital too went out of cash.

Minister of State for Finance Shiv Pratap Shukla said the government has formed a committee to address the problem of currency shortage in certain states and the issue would be resolved in next 2-3 days. A Finance Ministry official said that 76 per cent of the 2.2 lakh ATMs across the country were functioning normally on April 16. Political leaders, including Rahul Gandhi of Congress and West Bengal Chief Minister Mamata Banerjee trained guns at the Centre saying ATMs running dry was a reminder of demonetisation days. In its statement, the RBI said there was no shortage of currency in the system though it has decided to ramp printing at all its four currency prices.
Shortage "may be felt" in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway, it added.

To deal with the situation, Garg said the RBI would increase five-fold printing of Rs 500 notes to 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," he said. Garg noted that there is also a perception that there may be shortage of currency in the future. So people have started withdrawing and it has contributed to the crisis, he added.  "We keep adequate stock of currency notes, which is one-sixth of the currency in circulation," he said.
According to him, currency in stock is about Rs 2 lakh crore and these reserves are adequate to meet any unusual spurt in demand.
He assured that there was no reason for anyone to fear or any apprehension that either private sector or public sector banks are in danger. "Our banking is totally safe and people should not have in any apprehension in keeping deposits," he said. 

RBI report shows that the currency in circulation in the country has reached the pre-demonetisation level of about Rs 17 lakh crore.  The government said there has been adequate supply of currency notes to meet entire demand. "The government would also like to assure that it would be supplying adequate currency notes to meet even higher levels of demand if such demand were to continue in the coming days/months".
SBI Chairman Rajnish Kumar said it would not be correct to state that there is a currency shortage in the country. There has been an "imbalance" due to the crop procurement season, when demand for currency goes up.