Cash crunch in many parts of India as ATMs run dry; government says solution in 3 days

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New Delhi: Severe cash crisis has thrown life out of gear as ATMs have run dry in several states and cities including Telangana, Hyderabad, Varanasi, Vadodara, Bhopal, Patna and a few areas in Delhi.

Cash-starved customers in large numbers started queuing up outside ATMs and banks since early Tuesday morning to withdraw currency notes from vending machines, but most of them were either out of service or had a board notifying “no cash”.

Officials of several bank branches said that the banks' infrastructure is unable to handle the huge rush resulting in long serpentine queue.

Meanwhile, SP Shukla, Mos Finance has said, “We've cash currency of Rs 1,25,000 crore right now. There is one problem that some states have less currency and others have more. Government has formed state-wise committee and RBI also formed committee to transfer currency from one state to other. It will be done in 3 days.”

People in Hyderabad told news Agency ANI, 'We have been unable to withdraw cash from ATMs as the kiosks (ATM Kiosk), in several parts of the city, have run out of cash. We have visited several ATMs since yesterday but it is the situation everywhere'.

People in Varanasi said, 'We do not know what or where the problem is but the common man is facing difficulty as the ATM Kiosks are not dispensing cash. We have visited 5-6 ATMs since morning. We need to pay for the admission of children and purchase groceries & vegetables'.

With public anger rising across the country over cash availability, some media reports quoting bank officials said that the sudden spike in number of people willing to withdraw huge amount of cash stems from the fear of 'bail-in clause' in the Financial Resolution and Deposit Insurance (FRDI) Bill.

In Vadodara People were complaining of inconvenience due to lack of currency in ATMs saying, 'most of the ATMs were out of service, could only withdraw Rs 10,000 from one working ATM that also after spending a lot of time in the queue.

A few people outside ATMs in Delhi said, 'We are facing cash crunch. Most of the ATMs are not dispensing cash, the ones which are dispensing, have only Rs 500 notes. We are facing difficulty, don't know what to do'.

'We are facing a cash crunch. ATMs are not dispensing cash. The situation has been the same since 15 days. We have visited several ATMs today as well, to no avail,' people in Bhopal said.

Bail-in clause in FRDI Bill

The Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, introduced in the Lok Sabha in August last year, has a 'bail-in' clause, which some experts say brings potential harm to deposits in the form of savings accounts. The bill is currently undergoing scrutiny by a joint parliamentary committee. The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency. The draft bill empowers the Resolution Corporation to cancel the liability of a failing bank or convert the nature of the liability.

It does not specify deposit insurance amount. At present, all deposits up to INR 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act that is sought to be repealed by this bill.

Government's assurance

However, the government has time and again assured the Lok Sabha that money of all depositors in public sector banks will be protected and there is no need to create any fear psychosis.

"The government is committed to protecting every depositor in public sector banks and therefore we need not create any fear psychosis," Finance Minister Arun Jaitley had said while replying to a discussion on 'Supplementary Demand for Grants - Second Batch for 2017-18'in Lok Sabha.