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

6 months 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 6 months ago

Signed and shared to thousands. Again and again.

Pradeep Kumar M Sreedharan

7 months 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.

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7 months ago



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shrikant sundaram

7 months 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

7 months 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

7 months 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

7 months 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

7 months 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

7 months 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

7 months 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 7 months 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 7 months 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

7 months ago

Savvy enough to tweet, cant cut down cash usage?

Abhijit Gosavi

7 months 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

7 months 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

7 months ago

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

Radhakrishnan Machat

7 months 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 7 months ago

Less than 30%

Radhakrishnan Machat

In Reply to Pradeep Kumar M Sreedharan 7 months 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!

Cashless ATMs, problematic netbanking and PoS leave customers fuming at banks
Call it the after effects of the demonetisation the March ending pressure or that bank do not care about service standards anymore. In the past few days, customers of both public and private banks have been complaining about their inability to access their own funds through ATMs (Automated Teller Machines), not being able to access netbanking or, ATMs of various banks, which are running dry, especially since Saturday. This has led to a huge outcry on social media. This decline in service comes at a time when the banking industry as a whole is trying to find new ways to charge customers for what used to be included as part of the basic banking package.  Here are some of the issues raised on social media.
 
ATM showing zero cash and declining transactions: Several customers of Corporation Bank have tweeted that the ATM declined their transactions and showed zero balance even though they had sufficient funds in their account. This has the potential to trigger needless panic and worries about fraud. While we have sought a response from Corporation Bank, another post of Twitter suggests that the bank is facing problems in migrating its core banking solution to a new technology company. 
 
  
 
Unable to access netbanking: During the last weekend, some customers even found that the netbanking (online banking) facility of their bank was also out of order. 
 
 
 
ATMs without cash: One person found all the 14 ATMs that he visited on Monday had no money at all. Some customers were unable to complete transactions on point of sales (PoS) terminals.
 
The demonetisation drive announced on 8 November 2016 has led almost all ATMs across the country going cashless. When the drive ended, banking customers were under the impression that they would be able to withdraw cash from ATMs from 1st January onwards. However, despite big claims form the government and the Reserve Bank of India (RBI) the ground situation appears to be completely different.
 
Here are some tweets about ATMs going cashless...
 
 
 
  
 
 
 
In a research note, State Bank of India (SBI) says, the decline in cash withdrawals is intriguing even as limits on withdrawals have been removed completely from 13 March 2017. "Are people now averse to cash withdrawals because of strict monitoring? Or, there is indeed a shift to digital transactions? We are indeed not sure. It may be also noted that with the implementation of ban on cash transactions of over Rs2 lakh from 1 April 2017, further decline in cash withdrawals may be a possibility."
 
Notwithstanding the research note, it appears that since majority of ATMs have gone dry and hence there is a decline in cash withdrawals across the country.
 

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COMMENTS

Simple Indian

7 months ago

On hindsight it's quite evident that the demonetization exercise undertaken by PM Modi in Nov'16 has been a colossal disaster, both for its pathetic execution and the objectives it was supposed to achieve but obviously did not. Modi is a shrewd politician and would have known that such a massive exercise won't succeed without adequate preparation by various institutions like the RBI, Banks, FIs, ATM-managing agencies, etc. Also, his inefficient FM and pliable RBI Governor seem to have simply gone with Modi's grand plan without any planning on their part. In my view, the entire demonetization exercise achieved nothing of note, but put almost every Indian through untold misery for months on end, all because of one man's stupid idea. Considering how the Govt and RBI function at a snail's pace, the cash issue will remain lingering in our Banking system for several months, if not years. Like the demonetization drive, if the GST roll-out too is botched-up by Modi Govt (read FM Jaitley), it's going to be very very tough for Modi to keep his job beyond 2019. Good luck to him !

Gurudutt Mundkur

7 months ago

The concerned authorities seem to have not anticipated increasing pressure on ATM when there are restrictions on cash withdrawals at Bank counters.

Ramesh Poapt

7 months ago

sab ka saath, sab ka vikas....! govt, for the people....!

Mahesh S Bhatt

7 months ago

Can we have some fining mecanisms for Banks FOR Consumers?
No givers GUARANTEES in space where Government /Private only means taking for giving services.God also cannot bless.Mahesh

Mahesh S Bhatt

7 months ago

Can we have some fining mecanisms for Banks FOR Consumers?
No givers GUARANTEES in space where Government /Private only means taking for giving services.God also cannot bless.Mahesh

Fagun Suchde

7 months ago

There is a serious need to reduce the number of bank holidays in the country

Simple Indian

7 months ago

What amazes me is that the demonetization exercise has had ZERO benefits, yet people seems to support it. Ideally, people ought to protests by the 1000s to prevent such disastrous policies of the Govt, presumably being pushed by one autocratic leader. It's obvious that even months after the demonetization drive was started, many Banks' ATMs run dry because RBI hasn't adequately replenished the cash taken out of the system. This entire demonetization exercise has shown how poorly planned govt policies are, and how ill-equiped RBI is to manage the cash-flow in the country in such emergencies.

MOHAN SIROYA

7 months ago

Less said the better on this ATM mess. I agree to day Monday most of ATMs were cashless. Those which had cash was only in 2K. denomination .
But besides cashless ATMs another alarming part of ATM issue is ATM machines installed in every nook and corner , even in an open shop with no security for operating the same in secrecy. People have endangered their vital data info of the account while using such hazardous ATMs. Once such ATM is in operation in a corner of a chemist shop in mere 2,x3' where any one passing or standing on the counter can very well see the operation including PIN no. ATM means ANY TIME MONEY viz; 24x7.However this ATM of ICICI Bank will not work on all days after closing of shop, ( Normally 10 p.m. ) and on Sundays all 24 hours.
Such ATMs operate violating RBI guidelines for the safe and rightful operations of ATMs as defined in its Master Circular dt. July 1, 2014 in terms of para 4 (i) (b) . When RBI is questioned about such ATMs, it fails to respond. If asked under RTI, what action is envisaged in respect of such unsafe and partly accessible ATMs, reply is either "This does not fall under the definition of Information or "NO action on record". In short this the other aspect of ATMs under the regulated control of RBI. Who cares of safety and convenience of the common user?

REPLY

Arun Tom Abraham

In Reply to MOHAN SIROYA 7 months ago

https://en.wikipedia.org/wiki/Automated_teller_machine

SBI cuts base rate by 15 bps, with effect from April 1
Bringing cheer to customers who have raised loans prior to April 1, 2016, the largest public lender State Bank of India (SBI) cut its base rate by 15 basis points (bps) to 9.10 per cent with effect from April 1, 2017.
 
Earlier, the base rate stood at 9.25 per cent.
 
The marginal cost-based lending rate (MCLR) of the SBI, however, remains unchanged. The six-month MCLR rate is at 7.95 per cent while the three-year rate stands at 8.15 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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COMMENTS

Gurudutt Mundkur

7 months ago

All, hopefully, leading to reduction in rate of inflation.

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