Demonetisation redux? With ATMs running dry, cash crunch hits parts of country

Nearly five months have passed since Prime Minister Narendra Modi announced the historic demonetisation move and after a gradual pickup in the cash in circulation in the economy, it seems a liquidity crunch again seems to be taking hold in some parts of the country.

Anecdotal reports from many states suggests that due to a combination of factors, people have been struggling to obtain adequate cash from either ATMs or bank accounts.

The worst hit seem Andhra Pradesh and Telangana where many ATMs have run dry. People in Hyderabad have been left stranded as several ATMs across the country displayed a no-cash board.

According to a report in Business Standard, a State Bank of India official said that the supply of currency from RBI was far less than the demand. RBI has been supplying Rs 50 crore daily, whereas the demand was Rs 250 crore.

The Kerala government yesterday said the salary and pension distribution to its employees were disturbed by the shortage of currency in treasuries, as per a PTI report.

Kerala Finance Minister T M Thomas Issac said that the Reserve Bank of India (RBI) has not distributed enough notes and the salary and pension for the month of April even after the government has funds for the disbursements.

A similar scene was witnessed in Mumbai over the last weekend, which happened to be the financial year-end as well as an extended holiday.

President of the Cash Logistics Association of India, Rituraj Sinha, told a newspaper that ATMs ran dry because of the holidays and the year end.

A Moneylife report said that immediately after demonetisation, the RBI had started airlifting cash stock directly from its printing presses but stopped the practice after December 31 as cash supply increased.

What may have also aggravated the situation were recent rumours that the government may withdraw Rs 2,000 notes, something that could have resulted in a rush for acquiring more Rs 500 notes, according to Moneylife's analysis.

The rise of a liquidity crunch contrasts with official RBI data, which suggests the total currency in circulation by the end of March 2017 has risen to Rs 13.12 lakh crore (against a low of Rs 7.8 lakh crore immediately after the cash ban and Rs 16.63 lakh crore a year back).

RBI Deputy Governor Viral Acharya said last month the process of replacing currency would take another 2 months.

With inputs from PTI.