As currency flows to biggies, cash crunch hits smaller banks
The acute shortage of cash, after the demonetisation exercise, has hit the country’s mid-sized and smaller banks like Yes Bank and Dena Bank more than their large-sized peers, including State Bank of India (SBI), Punjab National Bank, ICICI Bank, Bank of Baroda and HDFC Bank, among others.
The Reserve Bank of India (RBI) has been releasing the larger chunk of cash to large banks, while leaving just a tiny share for their smaller peers, banking sources said. So, the latter are finding it tougher to cater to the surge in customer demand for cash, and most of their ATMs are running dry, they added.
The central bank has pumped in over ₹2.5 lakh crore into the system since the government announced its demonetisation drive on November 8.
Besides, there are over 4,000 currency chests in the country, of which SBI and its associate banks manage about a half, while more than 1,000 are managed by other public sector banks. Very few currency chests are managed by the mid-sized and smaller private banks, making things ever more difficult for these lenders.
This, many fear, could lead to a devaluation of their brand image.
“We are finding it difficult and the share of cash that is coming to mid-sized or smaller banks is much less than bigger banks, so our ATMs are mostly running dry and we have no way to refill them,” a senior official at a midsized private sector bank told HT on the condition of anonymity.
“At a time when the Centre wants more to come in, customer trust is eroding from these lenders, since they are coming across as less efficient for no fault of theirs,” another official of a small public sector bank said.
While RBI sources said the share of cash distribution depends largely on the customer base of a bank, a senior official of a mid-sized private sector bank said it was difficult to explain those dynamics to customers.