Money & Banking
Where is the currency going? Why are ATMs dry?
Over the past fortnight, especially as we approached the financial year-end and after, people from all over the country have been complaining about automated teller machines (ATMs) running dry even in metropolitan cities. Why is this happening?  Where has the cash disappeared? After tracking the outpouring of anger on social media and checking with some banking sources, Moneylife has pieced together what is going on with India’s currency supply. As always, the buck stops at the Reserve Bank of India (RBI). 
 
Until the first phase of demonetisation of Rs500 and Rs1000 notes ended on 31st December, the central government, under pressure due to the visible hardship faced by people standing in long queues, was in a mission mode. It had taken the help of the army and air force to distribute currency securely, directly from the printing presses in Mysuru, to key parts of the country, which faced acute shortages. This continued until the elections in various parts of the country, including Maharashtra, Punjab, Goa, Manipur and Uttar Pradesh. 
 
Supplying cash directly from the printing presses is an expensive business and the RBI has to pay for security as well. So, such direct lifting of currency has stopped sometime after 31st December. The RBI decided that the system was sufficiently remonetised and went back to its slow, currency supply system. 
 
However, ATMs began to run dry immediately after, even in metropolitan cities. Officially, all restrictions on cash withdrawals ended on 31st March as per an RBI notification. However, the central bank seems to have goofed up on assessing the actual currency requirement and its own ability to supply it.
 
Public anger is directed at banks.  Banks have been equally callous and are attempting to impose costs on cash withdrawal, as they are running short of cash. Here are some facts about why we are running short on cash:
1. As part of the demonetisation exercise, the RBI printed Rs 2000 denomination notes at its printing presses in Mysuru, with the bright idea of faster remonetisation. However, this backfired badly, since the government presses could not produce enough of Rs500 notes. When this led to a furore, the RBI ordered a stop to printing of Rs2000 denomination notes and the Mysuru presses were also told to switch o producing Rs500 notes. 
2. India’s currency requirement today is in the region on Rs19 lakh crore of cash currency. 
3. Of this, the printing of Rs2,000 denomination has almost stopped at just 3.5 billion (350 crore) pieces of currency, valued at Rs7 lakh crore.
4. Meanwhile, there are only six billion pieces of Rs500 denomination currency printed, with a value of Rs3 lakh crore. 
5. If one includes the stock of Rs100 denomination currency in the country, the total stock is Rs13.5 lakh crore. 
6. Bankers estimate the shortfall of currency is about Rs5.5 lakh crore of 10 billion (1,000 crore) pieces. 
7. This means that unless the government or the Prime Minister gets into the act and demands a crank up of currency printing and supply, we are destined to suffer currency shortages for the next six to eight months or even a year. This is what sober experts have been predicting late last year.
 
Other Problems: 
The mystery of the vanishing currency is further exacerbated by two other factors. First, that people have gone back to using cash for their regular needs, since it is just so much simpler. Meanwhile, media reports as well as rumours that the government plans to phase out the Rs2000 denomination notes over time has only increased the demand for Rs500 from cash hoarders and the currency is disappearing from banks very fast. The impact is two-fold – ATMs can stock less currency if the denomination is Rs500 notes and Rs100 instead of Rs2000. A lot of Rs500 notes are going out directly from the banks to favoured customers. 
 
Moneylife has written extensively about Hyderabad, but we hear as many complaints from Bengaluru, Pune and even parts of Mumbai. On 3rd April, we wrote about issues faced by customers in Mumbai. Read here: http://www.moneylife.in/article/cashless-atms-problematic-netbanking-and-pos-leave-customers-fuming-at-banks/50146.html. Earlier, it was felt that the problem was with State Bank of India (SBI) alone , but that is not the case. (Read http://www.moneylife.in/article/pre-merger-is-sbi-heading-towards-bankruptcy/50020.html). It is clearly a nationwide epidemic. We have written to the RBI asking about the situation and when the situation will normalise. We will update this report if and when we hear from the central bank. 
 
Here are some public reactions on twitter. 
 
 
 
 
 
 

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COMMENTS

Sucheta Dalal

2 weeks ago

If these bank charges worry you and anger you, please sign my petition to the RBI governor and finance minister. And do share it. Numbers make a difference : https://tinyurl.com/k45z4n5

REPLY

Pradeep Kumar M Sreedharan

In Reply to Sucheta Dalal 2 weeks ago

Signed and shared to thousands. Again and again.

Pradeep Kumar M Sreedharan

3 weeks ago

Looks plain and simple to me; now that whatever went on in the name of demonetisation has failed to drive people to digital money, they seem to be squeezing cash to force them into digital money.

Mr rick

3 weeks ago



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shrikant sundaram

3 weeks ago

YAwning gap in the execution and planning done if any. govt is taking citizens for granted and so are the banks... That people will find ways to get their work done one way or another... Just as banks hand over notes to favored customers, govt is also just favoring a few while the rest depend on chance to get thru

V ganesan

3 weeks ago

recently i have visited my sbt branch on april 3rd 2017.I enquired about minimum balane and other charges regarding withdrwal in atm.The manager is not able to show authenticated price list. I got a reply from the manager ican gothrough print media and telemedia. NOW if any charges levied without authenticated information i am planning a dharna in the moth of may infront of RBI IN CHENNAI.As per rbi notification atleast i should get information regarding charges onemonth in advance.

Deepak Narain

3 weeks ago

Govt has failed miserably in managing the situation after demonetization. All bureaucratic excuses for non-performance. We expect better from PM Modi. The problem can be solved if the political leadership means business genuinely. They are comfortable after winning elections but public is disappointed and feels cheated. Some emergency steps need to be taken to maintain their credibility.

ksrao

3 weeks ago

If only the govt had withdrawn 1000 den. notes and flushed the money supply with more 500 den. notes and new 200 den. notes ( as it is compelled to do now), then a good portion of the high den. notes leading to corruption would have vanished and along with them corruption too. Introducing 2000 den. notes while blaming 1000 den. notes for and expecting corruption to vanish, is like instructing a boy, "You should never scold others, you idiot." With smaller den. notes in circulation, common man's life would have been easier. All the measures that are taken now to book black money hoarders and tax evaders could have been taken with the same effect but without the useless upheaval that we went through. Both the government and RBI have proved to be unthinking and immature. RBI governor and his deputies get pay hike for this wonderful achievement.

Gopalakrishnan T V

3 weeks ago

The reasons are not far to seek. The preference for cash is back with the public. Using credit and debit cards invites some convenience ( Inconvenience for customers) Charges by all airline and travel agents like Makemytrip etc. Banks are reluctant to give cash although RBI has withdrawn all cash withdrawal restrictions. Digitalisation though took of during demonetisation has almost crashed now is the market reality. Retailers prefer cash and people are also comfortable with cash as the cards are not freely accepted .Some merchant establishment including Government undertakings levy 2% charge for using cards. People avoid depositing cash back in banks as the very sight of customers at banks premises is not liked by the staff as they feel customers are a nuisance and banks do not depend anymore on Customers as our father of Nation imagined and defined customers. Rs 2000 notes and Rs 500 are again getting hoarded by the vested interests as they know that it will take years for withdrawal if it all some Government decides in that way. Black money generation continues in new denomination notes and now bribes have to be paid in new notes and in kind. Old habits die hard and the system encourages continuance of old habit.

Alok Asthana

3 weeks ago

But there is no idea blaming RBI any more. Is just a slave of the Govt. They have handed over the keys to Sri Modi. Is no longer of any consequence in the Indian system. They just follow orders. No wonder Raghu Rajan had to go.

Simple Indian

3 weeks ago

While I agree with the writer that ATMs across even major cities are running out of cash, I believe the public is equally to blame for the situation. Have seen many well-off people pay at supermarkets, petrol pumps, etc. with cash, when they can very well pay by Credit / Debit Card. I believe this is because such people are either too accustomed to using cash as a mode of payment (which was supposed to change after demonetization), or have enough black money (taken as bribes, or by having undisclosed illicit incomes) and hence want to avoid the tax net. As a result, people with a genuine need for cash, for buying groceries or vegetables/fruits, etc. suffer. Even Banks haven't pushed Digital Payments platforms like UPI Apps or e-Wallets aggressively, which would have helped reduce dependence on cash at large. While institutions like the RBI will remain incorrigible when it comes to people-friendliness, the public at large too can do its bit to ease the situation.

REPLY

Radhakrishnan Machat

In Reply to Simple Indian 3 weeks ago

Why should the govt tell the people how to use/spend their money? According to a recent report, one per cent on Indians owns 60% of the country's wealth. The other 99% per cent own 40% of wealth. Instead of inconveniencing the 99% per cent the govt should have concentrated on the 1%.

Simple Indian

In Reply to Radhakrishnan Machat 3 weeks ago

Well, the Govt everywhere has every right to advise its citizens to make the financial system more transparent and efficient, by asking people to opt for payment systems which are efficient and dependable. Though I believe that the demonetization exercise was a huge disaster, as it didn't achieve any long-term objective, but instead put common public into too much inconvenience to justify such a move. However, I support the Modi Govt's drive for Digital Economy as the cash economy thrives from black-money, which many Indians have in tons. There are other countries like Argentina who have urged its people to opt for Aadhar-like phone-based payment systems, which has reduced dependence on cash considerably. Besides facilitating black-money circulation, cash also makes fake currency racket flourish, which affects every common citizen too. Of course, no major change can / should be done by force, but should be done gradually. Education of the people is most important for them to realize that certain policies of the Govt are indeed for their own good.
Also, the disproportionate wealth you mention exists globally, and there is no short-cut to solve it. IMHO, crony-capitalism is the root cause of income disparity between the rich & the poor everywhere. The only solution is for India (and every country) to strike a fine balance between being a free-market economy and a Welfare State.

Abhijit

3 weeks ago

Savvy enough to tweet, cant cut down cash usage?

Abhijit Gosavi

3 weeks ago

Rs 19 Lakh Crores is Rs 19 X 10^12, which is approx. 0.29T dollars! That is a huge amount for India's banking system to regenerate! If people are going back to cash for everything, yes, it looks like there's a challenging period ahead until equilibrium is reached. Great analysis, as usual. Isn't this hurting the economy?!

ksrao

3 weeks ago

Demonetisation was a half-conceived plan, hastily introduced by govt and totally bungled by RBI. If govt had withdrawn only 1000 value notes and pumped in more 500 value notes, people would not have suffered and still we would have seen the same success as now in the areas of black money reduction, fake money reduction and terrorism reduction, the great goals of the govt.

Hanumant Waghamare

4 weeks ago

As soon as elections are over I think government has started neglecting the citizens as they always do

Radhakrishnan Machat

4 weeks ago

The government at the Centre is bent up on punishing people of this country for voting it to power. Adding to people's misery is the fexible spines of people at the helm of RBI. The pity of democracy is that those political parties which garner less than 50% vote share rule the country without even considering the wishes of those rejected them.

REPLY

Pradeep Kumar M Sreedharan

In Reply to Radhakrishnan Machat 3 weeks ago

Less than 30%

Radhakrishnan Machat

In Reply to Pradeep Kumar M Sreedharan 3 weeks ago

True. Percentage varies from govt to govt. But, imagine a party with 30% vote share ruling the 70% rejected it. Also when it comes to contributions, political parties do a flip-flop. Look at the irony. The govt at the Centre, which tells villagers to avoid open defecation, also wants them to use digital mode of transactions!

CBDT proposes tax benefits for genuine equity deals
New Delhi, India's Income Tax Department has specified a list of equity share sale transactions that will have to comply with the latest Budget provision and pay long-term capital gains tax if Securities Transaction Tax has not been paid.
 
"It is proposed to notify that the condition of chargeability to STT (Securities Transaction Tax) shall not apply to all transactions of acquisitions of equity shares entered into on or after the first day of October, 2004 other than the specified transactions," the Central Board of Direct Taxes (CBDT) said in a draft notification on Monday, seeking stakeholder comments by April 11 to finalise the proposal.
 
These include purchase of shares of a listed company that are not frequently traded through preferential issue, transaction for purchase of listed equity share in a company not entered through a recognised stock exchange, and acquisition of shares of a company during the period it was delisted from recognised stock exchanges.
 
"Frequently traded shares means shares of a company, in which the traded turnover on a recognised stock exchange during the 12 calendar months preceding the calendar month in which the transfer is made, is at least 10 per cent of the total number of shares of such class of the company," the CBDT said.
 
The proposal comes after the Budget 2017-18 announcement to exempt from long-term capital gains tax only if STT had been levied on purchase of shares and other genuine cases such as public offers.
 
Indian stock market transactions attract STT in the range of 0.017 per cent to 0.125 per cent.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Cash component reduced, higher stock incentives to Pravin Rao: Infosys
Bengaluru, A day after Infosys founder N.R. Narayana Murthy termed the board-approved compensation hike for COO U.B. Pravin Rao as "not proper", the IT major on Monday said it has "reduced the cash component" of his compensation and introduced "higher stock incentives".
 
It said that it undertook a comprehensive survey of best practices and benchmarked senior management compensation with key Indian and global companies to attract and retain top quality talent.
 
"The compensation structure revised thereafter reduces the proportion of cash component in the total compensation and has introduced higher stock incentives (to be vested over a 4-year period); it was rolled out for the entire senior leadership including Pravin Rao, Chief Operating Officer," Infosys said in statement on Monday.
 
"The cash component of his compensation has decreased from Rs 5.2 crore (including annual cash bonus) to Rs 4.6 crore, a decrease of 10.6 percent. The performance-based component of the compensation (directly linked to company and individual performance) has been increased from 45 per cent to 63 per cent of total compensation.
 
According to the IT major, the net increase in Pravin Rao's compensation for FY 18 (2017-18) will be 1.4 per cent, given the four years vesting period of stock. This could go up to 33.4 per cent in fourth year, assuming similar grants are made in subsequent years based on company and individual performance.
 
Referring to Rao's compensation revision, CEO Vishal Sikka said that his commitment and contribution to the company has been immense, and his partnership over the past 3 years has been critical to the successes and growth of the company. 
 
The revised compensation proposal was placed before the shareholders and the recommendations have been approved by 67 per cent of the company's shareholders in a postal ballot, the results of which were disclosed to the stock exchanges on Saturday.
 
"... acknowledges the sentiments of shareholders who have not voted in favour of the resolution, and has also taken careful note of the statements expressed by the company's promoters," the company added.
 
Murthy, in an email on Sunday, said giving nearly 60 per cent to 70 per cent increase in compensation for a top level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6-8 per cent was "in my opinion, not proper".
 
"This is grossly unfair to the majority of the Infosys employees including project managers, delivery managers, analysts, programmers, sales people in the field, entry level engineers, clerks and office boys who are toiling hard to make the company better. The impact of such a decision will likely erode the trust and faith of the employees in the management and the board," he had said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Raja Bhat

3 weeks ago

Mr.Murthy is 100 percent right

SRINIVAS SHENOY

4 weeks ago

I concur with Murthy's views that there should be a good similar package for all the employees in the Company, since it is a team work, to enthuse them to perform better in the days to come

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