FM Arun Jaitley: No cash crunch in India, temporary shortage being tackled

Several parts of Andhra Pradesh Telangana Madhya Pradesh Bihar and poll-bound Karnataka have reported shortage of currency and ATMs running down. File

Several parts of Andhra Pradesh Telangana Madhya Pradesh Bihar and poll-bound Karnataka have reported shortage of currency and ATMs running down. File

"SBI is facing a major problem because payment under many government schemes is made through the bank". Where these notes of Rs. 2,000 denomination are going, who are keeping them out of circulation? A proper cash management system has been suggested to overcome such difficulties, which could help in maintaining the cash in the states, so that there is no misbalance of the funds, and people don't have to face the ordeal often times.

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 a lot of them were either out of service or had a board notifying "no cash".

There have been rumours that the passage of Financial Resolution and Deposit Insurance (FRDI) Bill will lead to heavy monetary losses for savers if a bank goes bankrupt. Currency notes in circulation are now at Rs 18.04 trillion.

The Congress party also slammed the government for the cash crunch, questioning if the cash shortage was deliberate.

He was referring to news reports of ATMs running out of cash at some places in the state.

Reacting on the cash crunch situation in the country, the Finance Minister Arun Jaitley on Tuesday said that the shortage is temporary and is being tackled quickly.

"The currency worth Rs. 15,00,000 crore was in circulation before demonetisation". Chhattisgarh chief minister Raman Singh said his state "like many other states, has been affected by a cash crunch". Government has formed state-wise committee and RBI also formed committee to transfer currency from one state to other. The demand for currency is also reflected in the slowdown in deposit growth. During the same period, bank credit grew 10.3% compared to 8.2% in the comparable period in the previous year. After the demonetisation exercise, the currency in circulation increased to Rs. 16,50,000 crore. These include ATMs of both nationalised and private banks.

Reports pointed out that banks in Telangana and Andhra Pradesh witnessed long queues for closure of fixed deposits as well as withdrawal from saving bank accounts.

In a nutshell, although there is no risk to banks due to either of these factors, the rush to withdraw money created a real shortage of currency at present.

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