India Continues To Struggle With Cash Shortage Continues
The cash crunch caused by the demonetization of Rs. 500 and Rs. 1000 by the Indian government is yet to improve even after three weeks. There are continuing reports of ATMs and bank branches running out of cash across the country. According to news reports, a large percentage of the total 2 lakh ATMs are seen to have a cash shortage. Rural areas are said to be suffering in particular, with no easing in sight.
The situation in the next week is likely to worsen with the salary rush and large numbers of people trying to withdraw money. Both the Reserve Bank of India (RBI) and the government have reassured the country that there is no dearth of cash and that there is no reason to panic. Nonetheless, the cash situation has not seen much improvement.
The problems have been primarily attributed to the lack of new Rs. 500 notes. Lower denomination notes are essential for daily transactions and the shortage of these currencies is creating issues.
India Today
In a statement, Arundhati Bhattacharya, chairman of the State Bank of India said,
The current availability is more of higher denomination notes. People want lower denomination notes, especially Rs 500. It takes time to change printing queues. Initially printing was concentrated on Rs 2,000 so as to provide bulk. For us, 33000 ATMs are currently dispensing cash. More will come up as day proceeds.
The RBI has not yet released any details of the printing of Rs. 500 notes. According to news reports, there are four currency printing presses in the country. Two owned by the central bank has a capacity of around 40 percent of the country’s total cash requirements. The rest owned by RBI can print nearly 16 billion notes per year in two shifts, representing 60 percent of the total.
If all presses run three shifts, the four presses would be able to print out close to 40 billion notes a year. When the demonization was announced, there were 15.78 billion notes of Rs 500 denomination and 6.84 billion notes of Rs 1,000. So the timelines are significantly large.
Furthermore a news report has claimed that the printing of the new Rs. 500 notes was nearly at a halt at two of the presses. Errors in the Rs. 500 notes and problems in the presses is said to be cause for the delay.
Clearly, given this scenario, the 50-day period set by PM Narendra Modi for the situation to be handled is unlikely to suffice. Experts believe that the
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