Have reviewed the currency situation in the country. Over all there is more than adequate currency in circulation… https://t.co/Hp7wrp6bMT
— Arun Jaitley (@arunjaitley) 1523947197000
Earlier on Monday, there were complaints of cash shortage in eastern Maharashtra, Bihar and Gujarat. This was almost a month after ATMs in Andhra Pradesh and Telangana had run dry.
Since Tuesday morning, similar reports started emerging from different parts of the country, following which the finance minister issued the statement.
Many ATMs seen ‘out of service’ in Patna, locals say, ‘have been taking rounds of ATMs since last three days but ca… https://t.co/MtLKcUB9pt
— ANI (@ANI) 1523945514000
According to RBI data, currency in circulation as on April 6 was Rs 18.17 lakh crore, which is close to the number at the time of demonetisation. While the growth in currency has been almost flat (compared to the day before demonetisation), the need for currency has shrunk considerably because of the high level of digitisation.
Since the amount of currency put out by the Reserve Bank of India (RBI) and government printing presses is adequate for normal transactions, bankers believe there is hoarding of the Rs 2,000 notes. Nearly Rs 5 lakh crore worth of Rs 2,000 notes were printed after demonetisation.
When the cash shortfall was reported from Andhra Pradesh and Telangana in March, it was attributed by some to a misunderstanding of the Financial Resolution and Deposit Insurance Bill, which had a ‘bail in’ clause where depositors would bear a portion of any losses. This purportedly triggered withdrawals from banks.
Bankers point out that currency in circulation typically peaks just before an election. But the only state going for elections in the coming weeks is Karnataka.
The demand for currency is also reflected in the slowdown in deposit growth. During the year ended March 2018, bank deposits grew by a measly 6.7% compared to 15.3% in 2016-17. During the same period, bank credit grew 10.3% compared to 8.2% in the comparable period in the previous year.