Amidst reports of a cash crunch and empty ATMs, Finance Minister Arun Jaitley on Tuesday sought to allay fears, saying “there is more than adequate currency in circulation”, even as the government blamed “unusual demand” for shortages in some areas.
In a bid to tackle the “unusual” currency demand, the government has also decided to increase printing of Rs 500 notes by five times.
Taking stock of the situation the Reserve Bank of India (RBI) said there is sufficient cash in the RBI vaults and currency chests. Nevertheless, printing of the notes has been ramped up in all its four note presses.
“Have reviewed the currency situation in the country. Overall there is more than adequate currency in circulation and also available with the banks. The temporary shortage caused by ‘sudden and unusual increase’ in some areas is being tackled quickly,” Jaitley tweeted.
At a hurriedly-called press meet, Economic Affairs Secretary S.C. Garg, said: “There is no cash crunch in the country. There is around Rs 18 lakh crore currency supply now, which is close to the circulation during the demonetisation period. We keep Rs 2.5-3 lakh crore more currency in stock for excess demand.”
He said there was unusually high demand for currency in the last couple of months. As opposed to an average demand of about Rs 20,000 crore a month, “in the first 13 days of April itself there was a demand of Rs 45,000 crore”, he said.
In the last few days the government has pumped cash into the system to meet the demand, he said. “We still have a reserve of Rs 1.75 lakh crore.”
“We have taken steps to increase the supply of currency in case the demand were to go up further. To give you an example, Rs 500 notes — we print about 500 crore of notes per day. We have taken steps to raise this production five times,” Garg said.
“Very soon, in the next couple of days, we will have a supply of about Rs 2,500 crore worth of Rs 500 notes per day. In a month, supply would be about Rs 70,000-Rs 75,000 crore. These notes alone can more than meet the demand of any month,” he said.
Garg attributed the sudden cash demand to localised phenomena.
“This unusual spurt in demand is seen more in some parts of the country like Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar,” the Finance Ministry said in a statement on Tuesday.
There were, however, reports of shortages in Maharashtra, Gujarat and Punjab as well.
The ministry statement said the government, along with the RBI, has taken all steps to meet this unusual demand.
“The shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway. RBI is closely monitoring both these aspects,” the apex bank said in a statement. It also said that as a matter of abundant precaution, RBI was taking steps to move currency to areas which are witnessing unusually large cash withdrawals.
Asked whether there was any hoarding of the Rs 2,000 notes, Garg said at the press meet: “In this system, there are about 6.70 lakh crore worth of Rs 2,000 notes. They are more than adequate to meet the transaction demand of customers… But, off late, we have noted somewhat lesser inflow coming back from circulation.
“We have not got this investigated, but you can assume that this one note is most suitable for people to keep with themselves. There has been some tendency of some people using Rs 2,000 notes, but that does not affect the overall supply of the Rs 2,000 notes.”
SBI Chairman Rajnish Kumar also stepped in to allay fears, telling a TV channel that “there has been adequate supply of currency from the RBI”.
“In certain states, the demand has gone up. These states are Madhya Pradesh, Telengana, Andhar Pradesh, north Bihar and Punjab. One possible reason is the procurement season has started and the demand for payment to farmers has gone up. In Maharashtra there is no shortage of cash, as far as SBI is concerned,” Kumar said.
“We had adequate reserves of currency notes which have been used to meet fully the extraordinary demand generated so far. We continue to have in stock adequate currency notes of all denominations, including of Rs 500, 200 and Rs 100, to meet any demand,” the Finance Ministry statement said.
“The government would like to assure all the people that there has been adequate supply of currency notes which has met entire demand so far. The government would also like to assure that it would be supplying adequate currency notes to meet even higher levels of demand if such demand were to continue in the coming days/months,” it added.
The statement further said the government is taking all steps to ensure that ATMs are supplied with cash and to get faulty ATMs working at the earliest.
Reacting to the situation, West Bengal Chief Minister Mamata Banerjee on Tuesday said it reminded her of the demonetisation days. She also wondered whether there was a “financial emergency” in the country.
Congress President Rahul Gandhi too criticised the government and slammed Prime Minister Narendra Modi for what he described as destroying India’s banking system by ushering in “acchhe din” for fugitive jewellers Nirav Modi and Mehul Choksi.
“Modiji destroyed the banking system. Nirav Modi fled with Rs 30,000 crore and the Prime Minister didn’t utter a word. We were forced to stand in queues as he snatched Rs 500-1,000 notes from our pockets and put them in Nirav Modi’s pocket,” he said.