'Unusual demand' reason for cash crunch, says govt


However, the central bank stated that printing of currency notes has been ramped up in all the four note presses. What's behind the cash crunch? There is one problem that some states have less currency and others have more. Many problems have occurred due to lack of currency. It said there has been "unusual spurt in currency demand in the country in last three months". The Finance Ministry too had said printing of Rs 500 notes was being increased five-fold.

A few people outside ATMs in Delhi said, "We are facing cash crunch". At this time, that reserve seems to have depleted to Rs 1.75 lakh crore. "Big notes missing. Reminder of Demonetization days", Mamata Banerjee, the firebrand chief minister of eastern West Bengal state said on Twitter. Presently, RBI and the government print Rs 500 crore worth of Rs 500-denomination notes daily.

The people in Delhi, on the other hand, said that most of the ATMs are dispensing only Rs. 500 notes.

Garg attributed the sudden cash demand to localised phenomena.

This comes amid reports of an unusual spike in cash in the ATMs in many parts of the country.

"Our internal estimates suggest that in states like Bihar, Gujarat and the southern states, the income velocity is far less than the national average", Ghosh said.

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"It's not something that is pan-India", a Reserve Bank of India spokesman said, but limited to a number of machines in certain states, among them Andhra Pradesh and Telangana. He blamed a sudden and unusual increase in cash withdrawal for the situation. But even this may not be enough to meet the rising demand of cash.

"Of late, we have noted somewhat lesser inflow of the 2,000 rupee notes coming back in circulation".

"We have not got this investigated, but you can assume that this one note is most suitable for people to keep with themselves". He, however, quickly added that this does not affect the overall supply of Rs 2,000 notes.

There is also a perception that there may be shortage of currency in the future.

There has been an "imbalance" due to the crop procurement season, when demand for currency goes up, he said, adding Punjab, Madhya Pradesh and Uttar Pradesh are seeing heightened demand because of the procurement season. "The cash shortage may be because cash supply has been arbitrarily reduced". To combat the high demand, the plan is to increase the supply of cash into the entire baking system but no timelines have been given by the government.

Taking cognizance to the matter, Mos Finance SP Shukla said that government is aware of the issue and steady steps are taken by the Government.