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Cash crunch: SBI Research pegs shortfall at Rs 70,000 cr

Thursday, April 19, 2018

Even as government and Reserve Bank have asserted that there is no currency shortage, SBI Research yesterday pegged the cash shortfall in the system at a whopping Rs 70,000 crore, which is a third of the monthly withdrawals at ATMs.

In a note that comes a day after reports of currency shortages made national headlines, it depended on nominal economic growth, currency with the public and the rise in digital transactions to arrive at the shortfall estimate.

A 9.8% nominal GDP growth would have taken the currency available with the public to Rs 19.4 trillion by March 2018, as against the actual availability of Rs 17.5 trillion, it said, stressing that the gap of Rs 1.9 trillion is not the shortfall.

The proportion of digital transactions stands at a low Rs 1.2 trillion only, much down the immediate months following the November 2016 note-ban.
"The apparent shortfall thus could be around Rs 70,000 crore or even less," it said.

The note estimates that Rs 15,291 billion were withdrawn from ATMs through debit cards in the second half of FY18, which is a good 12.2% growth over the previous six months.

Reacting to reports of the currency shortage, it said the currency in circulation has breached the pre-note ban levels of Rs 17.84 trillion and added that such reports are "intriguing and defy logic".

The report explains that a part of the reason why the shortage is being felt could be the introduction and faster- acceleration in printing Rs 200 notes.

"This may have altered the demand for smaller denomination notes in a larger way to possibly substitute for the currency of larger denominations," it said.

"As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available," the report added.

Cash position improving, 80% ATMs operating, sources
Cash position across the country is improving fast with over 80% of 2.2 lakh ATMs operating normally yesterday, official sources said.  Unusual spurt in demand for currency had led to many ATMs and banks running out of cash in Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Telengana and poll-bound Karnataka and some other states yesterday even as the government and the RBI assured the public that there was no currency shortage.

"Cash position has improved substantially as over 80% of ATMs working normally across the country as against 60% day before yesterday", sources said yesterday. On an average 10-12% of ATMs at a given point of time are usually under maintenance due to one or the other reason and remain out of service. So during normal days 88% of ATMs are working and the rest are under maintenance, said sources.

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