India calms cash crunch worries, will ensure adequate currency supply
(Adds RBI comment)
By Suvashree Choudhury
MUMBAI, April 17 (Reuters) - India's government and the
central bank said on Tuesday they will ensure there is an
adequate amount of cash in circulation, following reports that
banks' automated teller machines (ATMs) had run out of notes in
different parts of the country.
The RBI said it had ramped up printing of notes https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=43690
despite having sufficient cash in its vaults and currency
"As a matter of abundant precaution, RBI is also taking
steps to move currency to areas which are witnessing unusually
large cash withdrawals," the central bank said in a statement
late on Tuesday.
Cash withdrawals in India go up during the crop harvest
season, which is usually during March to April, and then during
the festival season in October. But there has been an unusual
rise in currency demand in the last three months.
That is a source of worry for policymakers because a
sustained heavy currency withdrawal suggests people may be
hoarding cash again.
Prime Minister Narendra Modi had ordered a shock ban on
high-value currency notes in late 2016, in a move aimed at
flushing out hoarded cash and curbing the funding of terrorism.
"The total stock of currency has come down but still we have
notes worth more than two trillion rupees ($30 billion) in stock
which is more than sufficient," said the government's economic
affairs secretary Subhash Chandra Garg.
Currency withdrawal by individuals during January-March 2018
was at 1.4 trillion rupees, sharply higher than 1.1 trillion
rupees in the same quarter of 2016, according to Reserve Bank of
India data. The March 2017 quarter data is not comparable as the
RBI was in the process of re-injecting currency notes after the
so-called demonetisation in November 2016.
The RBI on Tuesday said that the shortages in some pockets
might be due to the logistics of replenishing ATMs and that the
recalibration of machines was underway. "RBI is closely
monitoring both these aspects," it said.
While it is difficult to trace any specific reason for such
massive cash withdrawals this year, analysts say that concerns
over the health of India's banking system has also led savers to
India's banking system has been fraught with challenges
including a surge in bad loans and a recent revelation of a
$2-billion fraud at the country's second-largest state lender
Punjab National Bank.
Investors have also been wary of issues surrounding the
chief executives of two big private sector lenders - ICICI Bank
and Axis Bank.
Cash withdrawals have gone up sharply in the last three
months especially in states of Andhra Pradesh, Telenghana,
Karnataka, Madhya Pradesh and Bihar, the government said in a
release adding 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".
The government also dismissed concerns over an insufficient
supply of the high-value 2000 rupee note while acknowledging
that there was a lower inflow of the highest-denominated notes
coming back into circulation.
($1 = 65.6575 Indian rupees)
(Additional reporting by Manoj Kumar in New Delhi and Abhirup
Roy in Mumbai
Editing by Jacqueline Wong and Hugh Lawson)
First Published: 2018-04-17 13:37:22
Updated 2018-04-17 18:16:06
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