Currency crunch: Ghost of demonetisation haunts government, RBI, says Chidambaram

ATMs in some parts of the country continued to remain out of cash on Wednesday as the government scrambled to rush currency to meet an "unusual spurt in demand".

Pic courtesy: PTI (File image)

New Delhi: Even the government scrambled to rush currency to meet an "unusual spurt in demand" ahead of looming polls as ATMs in some parts of the country continued to remain out of cash, former finance minister P Chidambaram on Wednesday attacked the government and the RBI and said the ghost of demonetisation has come back to haunt them.

"I suspect ordinary people are withdrawing cash but not putting back into the banks their surplus cash. It is possible that there is some loss of confidence in the banking system, thanks to the bank scams. After demonetising 500 and 1,000 rupee notes, the government printed Rs 2,000 notes. Now, the government is complaining that Rs 2,000 notes are being hoarded. We always knew that Rs 2,000 notes were printed only to help hoarders. The ghost of demonetisation has come back to haunt the government/RBI. Why are ATMs still bring re-calibrated even 17 months after demonetisation?" Chidambaram said in a series of tweets.

"I support digitisation, but the government cannot force the pace of digitisation or arbitrarily reduce the supply of cash. Is it correct that currency in circulation has increased by only 2.75 percent since demonetisation? If so, I maintain that government/RBI are not allowing the money supply to grow at the same rate as the nominal GDP. I also suspect that RBI seriously miscalculated demand for cash in the post-harvest season," he said. 

"RBI's statement is unsatisfactory. If RBI has printed and supplied sufficient cash, it must explain why there is a cash shortage," the senior Congress leader added.

RBI's statement is unsatisfactory. If RBI has printed and supplied sufficient cash, it must explain why there is a cash shortage. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

The ghost of demonetisation has come back to haunt the Govt/RBI. Why are ATMs still bring re-calibrated even 17 months after demonetisation? — P. Chidambaram (@PChidambaram_IN) April 18, 2018

After demonetising 500 and 1000 rupee notes, Govt printed Rs 2000
notes! Now, Govt is complaining that Rs 2000 notes are being hoarded!! We always knew that Rs 2000 notes were printed only to help hoarders. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

I suspect ordinary people are withdrawing cash but not putting back into the banks their surplus cash. It is possible that there is some loss of confidence in the banking system, thanks to the bank scams. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

I also suspect that RBI seriously miscalculated demand for cash in the post-harvest season. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

Is it correct that currency in circulation has increased by only 2.75 per cent since demonetisation? If so, I maintain that Govt/RBI are not allowing money supply to grow at the same rate as the nominal GDP. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

"Cash is back with a vengeance" says Navrose Dastur, MD, NCR Corp, India. I support digitisation, but Govt cannot force the pace of digitisation or arbitrarily reduce the supply of cash. — P. Chidambaram (@PChidambaram_IN) April 18, 2018

The RBI on Tuesday had said that there was "sufficient cash" in its vaults and currency chests. "It is clarified at the outset that there is sufficient cash in the RBI vaults and currency chests. Nevertheless, printing of the notes has been ramped up in all the four note presses," it had said in a statement.

Meanwhile, ATMs in cities of Uttar Pradesh, Bihar, Andhra Pradesh, Maharashtra and poll-bound Karnataka were either not operating or showed no cash signs. Some ATMs in the national capital too were reported to be out of service.

The government on its part claimed that the situation was fast improving with over 80 percent of 2.2 lakh ATMs operating normally today as against 60 percent on Tuesday.

Officials attributed the "unusual spurt in demand" for payments made for crop procurement and looming elections. Banks, they said, are replenishing cash at ATMs, PTI reported.

Senior finance ministry officials on Wednesday held video conferences with public sector banks during which they have been asked to replenish ATMs with 500 rupee notes.
The PSBs have been asked to ensure that above 80 percent of ATMs start dispensing cash within a day and step up cash supply in all branches.

The shortage has been blamed on the inadequate availability of Rs 2,000 currency notes, and the fact that ATM cassettes have not been configured to dispense smaller Rs 200 notes.

Other reasons being attributed for the cash crunch are upcoming polls in Karnataka, state government programmes in Telangana and AP that are used to make cash payments, festive seasons, and misunderstanding of the Financial Resolution and Deposit Insurance Bill's 'bail-in' clause, where depositors would bear a portion of any losses.

(With Agency inputs)