RBI refutes reports of currency shortage

Subhash Chandra Garg

RBI refutes reports of currency shortage

Ram Kumar Gupta, former President of Eastern Maharashtra Bank Employees' Association (EMBEA), attributed the prevailing cash crunch to alleged wrong policies of the Central Government.

The ban removed 86% of the country's currency from circulation at a stroke, and threw the cash-dependent economy into turmoil for weeks.

Corporation bank deputy general manager, Sridhar, said that cash shortage was never experienced in the city although some pockets in north India had faced cash shortage. "This is adding to the problem of shortage and inability of customers to withdraw money from ATMs", AIBEA said. "Rs 2,000 notes constitute the bulk of currency supply and hence there is a shortage of notes of small denominations. viz Rs 50, Rs 100", he said.

The finance ministry said earlier this week that there is an unusual spurt in demand in some parts of the country like Andhra Pradesh, Telangana, Karnataka, MP and Bihar.

Blaming "unusual demand" for currency shortages in some areas, the government on Tuesday announced it has made a decision to increase printing of Rs 500 notes by five times.

Some reports (here and here) suggest that the RBI is not supplying Rs 2,000 notes to banks.

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The city with more than 550 ATMs saw "no cash" boards displaying at almost 125 to 150 ATMs. Ironically, the cash woes have hit the country barely a month after the RBI's assertion that the currency in circulation had crossed the pre-demonetisation level.

The cash handling industry on Thursday termed the recently introduced rules by the Reserve Bank as "onerous" which will result in an increase in compliance costs and demanded a steep increase in their fees.

"After demonetizing 500 and 1,000 rupee notes, the government printed Rs. 2,000 notes!" "It is poor currency distribution management", he said in a television interview. The government is reportedly planning to supply an additional Rs 1,000 crore to Bihar.

According to the government, RBI has stopped printing of Rs2,000 notes sometime back, and has instead stepped up the printing of Rs500 notes.

However, as we said, an SBI research team said that "income velocity"-ratio of GDP to money supply-based on currency with the public, went down from 0.93 in October to 0.84 in March". "This may have altered the demand for smaller denomination notes in a larger way to possibly substitute for currency of larger denominations", it said.

SBI Research on Wednesday dropped a bombshell saying the shortfall in currency with public stood at a staggering Rs 70,000 crore.

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