Why ATMs became cashless more than a year after re-monetisation

Daniel Fowler
April 19, 2018

A statement from the Finance Ministry confirmed reports of cash shortages and some ATMs running dry or becoming non-functional in some parts of the country, the report said. However, SBI Research in a report said that there was Rs 70,000 crore cash shortfall in the system, which is a third of the monthly withdrawals at ATMs.

On Wednesday, finance ministry officials held video-conference with the heads of state-owned banks and asked them to ensure that more Rs 500 notes are available at ATMs to deal with cash crunch.

"There is also a perception that there may be a shortage of currency in the future".

Some reports suggest that delay in recalibration of cash vending machines to dispense Rs 200 notes is one of the reasons for the currency shortage. Also, all the four printing presses are working round-the-clock to print smaller currency notes. We always knew that Rs 2,000 notes were printed only to help hoarders.

Hindustan Times via Getty Images NEW DELHI, INDIA - APRIL 17: An ATM with a sign board showing no cash at Bengali Market, near Mandi House, on April 17, 2018 in New Delhi, India.

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But the bigger question is that what has led to cash crunch in several states more than a year after the demonetisation. There has been an unusual spurt in demand for cash in the last few months with the withdrawals through ATMs touching an unprecedented level of Rs 45,000 crore in the last 13 days while the inflow of cash back into the banking system has slowed down significantly.

Regarding the availability of cash with the country's largest lender, SBI Chief Operating Officer Neeraj Vyas said in a statement that the situation had improved over the last 24 hours. But now the decision to re-calibrate the ATMs to fit the Rs 200 notes lies with banks.

That is a source of worry for policymakers as a sustained heavy currency withdrawal suggests a return of cash hoarding by individuals, diluting the goal of a massive note ban exercise by Prime Minister Narendra Modi in late 2016. Government sources said on an average 10-12 per cent of ATMs at a given point of time remain under maintenance or closed and so now only a small number of ATMs are extraordinarly out of service.

Printing of Rs 500 notes was stopped because CNP-Nashik had completed the target of printing 1,800 million pieces set by RBI for 2017-18.

As a share of the economy, cash in circulation is about 11 per cent, lower than the 12 per cent before the demonetisation drive. While the government and the RBI assured the public that there was no currency shortage, the situation on ground is totally different. The response to the query said, "To print Rs 2,000 currency notes no demand has been made by the RBI to the SPMCIL".

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