Is the ‘Cash Crunch’ being faced Real Or Not? Know the inside story!!!

From yesterday the news of the Cash Crunch is hitting all the news channels. It is the most hot topic being discussed. With the news of not being cash in the ATM, rumour is spreading that there is a huge reduction in cash in the country. Whereas the reality is something else.

Complaints about cash crunch are coming from Karnataka, Maharashtra, Andhra Pradesh, Rajasthan, Uttar Pradesh, Madhya Pradesh and Telangana. Yes, we agree there is a shortage of cash at some places but it doesn’t imply that the situation is same everywhere.It doesn’t mean that the cash is totally out of the system. It is just the cash imbalance. It is “temporary shortage in some areas” and Government is trying their best to tackle it quickly. It is not a hidden fact that in general, 15-20% of ATM remains closed for some reason. Today, efforts have been made to create a ruckus by making such a few ATMs as centers.

To put an end to these rumours, The Reserve Bank of India (RBI) has also come up with a report that denied currency shortage in certain parts of the country. The Reserve Bank of India (RBI)  issued the statement that the shortage may be felt in some pockets due to logistical issues and clarified that there is sufficient cash in RBI vaults.

The RBI said in a statement, “It is clarified at the outset that there is sufficient cash in the RBI vaults and currency chests. Nevertheless, printing of the notes has been ramped up in all the 4 note presses.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,” the statement added.

Finance minister Arun Jaitley also echoed similar views and said that there is “more than adequate” currency in circulation. Minister of State for finance Shiv Pratap Shukla said the government has formed a committee to address the problem of currency shortage in certain states and the issue would be resolved in next 2-3 days.”The Government of India with the Reserve Bank of India have taken all steps to meet this unusual demand. We had adequate reserves of currency notes which have been used to meet fully the extraordinary demand generated so far,” the finance ministry statement said.

State Bank of India chairman Rajnish Kumar also clarified and said the problem lies largely in Andhra Pradesh, Telangana, Karnataka and parts of North Bihar and it was wrong to call it a currency shortage. “One reason could be that the procurement season has come and the payment to farmers has gone up.

Some people are referring to it same as demonetisation but it is nothing like that. RBI data in February this year had shown that the currency in circulation in the country was at 99% of pre-demonetisation level. The total currency in circulation stood at Rs 17.78 trillion on 16 February, 2018. Before demonetisation, the total currency in circulation was Rs 17.97 trillion. Moreover at that time restrictions were there on the withdrawal of amount. But there is no such situation today.

The government said it suspects that Rs 2,000 notes were being hoarded and plans to increase 5-fold the printing of Rs 500 notes. Within a month, it said, Rs 70,000-75,000 crore will be printed. The fact is that the notes of Rs 2000 are slowly getting reduced from the market. There is a huge reduction in the notes of 2000 in the notes being sent to the banks by the Reserve Bank for around 6 months or more. Banks are sending small notes of 100,200,50 instead of 2000  by the Reserve Bank. The Reserve Bank is slowly collecting notes of 2000, reaching out to them through banks. This process will slow down the circulation of 2000 notes in the market slowly. This shortage of 2000 notes is being made very heavy on the number 2 businessmen.

So, in reality, it is only the hype being created whereas the actual situation is not as it is presented.