SBI Pegs Cash Shortfall at Rs 70,000 Crore, Blames Rs 200 Note
SBI says that the cash-crunch is due to the fast circulation of Rs 200 & slow circulation of Rs 2,000 notes.
advertisement
Even as the government and the Reserve Bank of India (RBI) have denied any currency shortage, research by the State Bank of India (SBI) pegged the cash shortfall in the system at a whopping Rs 70,000 crore, which is a third of all monthly withdrawals at ATMs.
In a report that comes a day after concerns over currency shortage made national headlines, SBI said that it calculated nominal economic growth, currency held by the public, and the rise in digital transactions to arrive at the shortfall estimate.
A 9.8 percent nominal GDP growth would have taken the currency available with the public to Rs 19.4 trillion by March 2018, as against the actual availability of Rs 17.5 trillion, it said, stressing that the gap of Rs 1.9 trillion is not the shortfall.
The proportion of digital transactions stands at a low Rs 1.2 trillion, much less than its level in the immediate months following the November 2016 note ban.
"The apparent shortfall thus could be around Rs 70,000 crore or even less," it said.
The SBI report estimates that Rs 15,291 billion were withdrawn from ATMs through debit cards in the second half of FY18, which is a good 12.2 percent growth over the previous six months.
Printing of Rs 200 Notes a Reason?
The SBI report explains that a part of the reason why the shortage is being felt could be the introduction and faster acceleration in printing Rs 200 notes.
"As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available," the report added.
It can be noted that in a statement, the RBI had on 18 April attributed the shortage to "logistical issues" in both replenishing ATMs with cash and also recalibrating those to accommodate the Rs 200 notes.
The higher level of economic activity in the fourth quarter may have also resulted in more withdrawls at ATMs, the report said in the note.
The report also dismisses notions of the rising demand being due to proposals in the Financial Resolution and Deposit Insurance Bill, saying those were mooted over five months ago.
Rs 2,000 Notes Slow in Circulation
The SBI report mentions that the decline in the income velocity shows that the circulation of the Rs 2,000 note isn’t being carried out adequately in the economy, The Indian Express reports.
Adding to this, opposition leaders have begun to suspect that Rs 2,000 notes are being hoarded by people who are collecting black money, which is further causing a cash shortage at ATMs in several states such as Gujarat, MP, Andhra Pradesh, Telangana and Karnataka, according to The Times of India.
Another report by The Times of India says that about 30-35 raids had been conducted by the tax-authorities, in Karnataka and certain parts of Andhra Pradesh. This, the report mentions, was done in an attempt to track down those hoarding cash.
The amount collected on account of the raids was not very large, the report states. However, further and more frequent raids were expected to be carried out, due to the alleged hoarding of Rs 2,000 notes being seen as the main reason for ATMs reporting a cash-crunch in several parts of the country.
(With inputs from The Indian Express and The Times of India)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)