RBI, banks trade charges over cash crunch

The cash shortage in the automated teller machines has led to banks and the regulator at loggerheads with banks pointing out supply shortages though the central bank thinks its a logistical issue for the banks. While currency in circulation has been increasing since January but bankers said distribution is skewed towards northern and eastern states.

According to latest data released by RBI, currency in circulation as on 7 April was Rs 13.61 lakh crore as compared to Rs 12.45 lakh crore as on March 10. While currency in circulation has definitely increased but the pace has slowed down since the last week of March.

Banker said the distribution of currency was skewed towards the states that went to polls in February-March and the situation has not been corrected even after polls are over.

A senior central bank official, has however, denied supply has been curtailed. “We are infusing money which is evident from the fact that currency in circulation numbers are increasing. Banks have to manage logistics properly,” the official said adding that it is quiet possible banks are keeping proportionately more funds in branches and less in ATMs.

Another senior official from RBI said typically people withdraw more cash during the last and first few days of a month, after which money started come back to the system again.

However, the official admitted that it is a concern among government and regulator that cash withdrawals are going up steadily. One of the aim of the recent demonetization exercise was to move to a less cash society and encourage digital modes of payment.

However, cash withdrawals from automated teller machines (ATM) has continued its upward journey which further increased in February 2017 to Rs 1.93 lakh crore from Rs 1.52 lakh crore in January and believed to be on track to reach the pre-demonetisation levels.

“Following the withdrawal of high value currency notes, digital mode of payments have gained acceptance. However, at the same time cash transactions are also coming back. This is an area of concern,” the RBI official added.

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Source:The hindu

RBI