Govt to probe suspected hoarding of ~2,000 notes

The government has launched a probe into suspected hoarding of ~2,000 notes and a spike in cash withdrawals over the last fortnight.

“The Department of Revenue will establish the reason for possible hoarding of ~2,000 notes. There has also been a sudden increase in cash withdrawals, especially in the last 15 days, which will also be looked into,” a senior finance ministry official said on Wednesday, on condition of anonymity.

Economic Affairs Secretary Subhash Chandra Garg had said on Tuesday the government had observed a trend that ~2,000 notes were not returning to the banking system. “You can assume this is one note that is most suitable to hoard,” he told reporters.

Also, the finance ministry had told the Prime Minister’s Office (PMO) on Tuesday around 40 per cent of the 221,700 ATMs across the country were non-functional as of April 16. The ministry held meetings with top officials of all banks through video conferencing on Tuesday and Wednesday and directed them to fill up ATMs expeditiously. “By Thursday, around 80 per cent of the ATMs will be functioning across the country; banks have been told to ensure that. The recalibration exercise, to support the new design of notes, will be ramped up, though not all ATMs require recalibration,” another official aware of the developments said.

A committee comprising the economic affairs secretary, financial services secretary and RBI deputy governor, formed last week, has been tasked with planning and coordinating the printing and supply of currency.

ATMs in some parts of the country remained out of cash on Wednesday, with the machines either not working or showing ‘no cash’ signs, especially in Bihar, Uttar Pradesh, Karnataka and Maharashtra.

SBI said cash availability at its ATMs had improved, while Punjab National Bank, Canara Bank and Axis Bank said cash crunch was limited to a few places. SBI said around 92 per cent of its ATMs were working on Wednesday, as against 85 per cent on Tuesday.

Banks have informed the finance ministry that a large number of ATMs were running dry because of low supply of high-value currency. Printing of ~2,000 notes may have been paused for a few months now, but the government and the Reserve Bank of India (RBI) have not clarified exactly when the printing was discontinued.

According to Garg, ~2,000 notes worth ~7 trillion were in circulation, accounting for over a third of the total notes in circulation at ~18.04 trillion.

Printing of ~500 notes also saw a drastic cut in the past few months. Some reports claimed that its printing at Nashik-based Currency Note Press (CNP) was stopped in November last year. The government said on Tuesday the production of ~500 notes would be increased by five times in the coming days.

Besides non-functional ATMs, the finance ministry had apprised the PMO about the possible hoarding of ~2,000 notes, low supply of ~500 notes and a spike in cash withdrawals as some of the reasons behind the cash crunch.

According to the official data, on April 16, there were cash withdrawals worth ~294.7 billion from the ATMs and branches, as against deposits of ~236.5 billion.

The rate of cash withdrawal against deposits was almost double in Uttar Pradesh, Andhra Pradesh and Telangana, according to the latest analysis submitted by the RBI to the finance ministry.

The government said in a statement on Tuesday there had been an “unusual spurt in currency demand in the last three months” in some parts of the country, including Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar.