ATMs run dry, set off alarm
Cash crunch hits several states; printing of ₹500 notes increased 5fold
A spike in demand for cash to ₹45,000 crore in the first 13 days of April — from a monthly ₹40,000-45,000 crore in February and March — caused automated teller machines (ATMs) across many parts of India to run dry, forcing the government to step in on Tuesday to increase the daily print order for ₹500 notes fivefold. Demand in February and March had already doubled from ₹20,000 crore a month on average for the past year.
The government said ₹2,500 crore of ~500 notes will be printed everyday over the next few days against the ~500 crore that’s the norm. In a statement, it said Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar were the worst hit by the ATM cash shortage.
Finance minister Arun Jaitley took to Twitter to address fears of a full-blown cash crunch: “The temporary shortage caused by sudden and unusual increase (in demand) in some areas is being tackled quickly,” he said.
The Reserve Bank of India, too, issued a statement reassuring the public that it had sufficient cash in its vaults and currency chests.
“Nevertheless, printing of the notes has been ramped up in all the four note presses,” the statement said. “The shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway. RBI is closely monitoring both these aspects. Further, as a matter of abundant precaution, RBI is also taking steps to move currency to areas which are witnessing unusually large cash withdrawals.”
Still, the cash crunch, building over the past few days, and brewing since February, created panic across the country with many ATMs running dry simply because people rushed to them to withdraw money. Across many parts of India, large queues could be seen outside ATMs. The government admitted that 10-12% of the ATMs in the country were without cash.
Economists attribute the sudden increase in demand for cash to several factors: the harvest season, which usually means more demand for cash to pay agricultural workers; festivals, which mean more spending; a revival in the economy after the twin shocks of demonetisation (in November 2016) and GST implementation (in 2017); and fears that passage of the Financial Resolution and Deposit Insurance Bill passage could lead to people losing their deposits if banks failed.
“The volatility in cash demand is worrying simply because that’s not what you expect in a $2.3 trillion economy,” said one economist on condition of anonymity.
Whatever the reason, there was panic and chaos in many parts of the country. In Lucknow, most ATMs were out of cash by mid-day.