While the Indian government and central bank are at pains to assert there is no cash shortage in the country, after automated teller machines in many states have gone dry, a paper by the research arm of the State Bank of India belies the claim.
SBI Research has pegged the cash shortfall in the system at a whopping 700 billion rupees (US$10.64 billion), which is a third of the monthly withdrawals normally made at ATMs, reports Business Standard.
The firm looked at nominal economic growth, currency in public hands and the rise in digital transactions to arrive at the shortfall estimate.
Nominal GDP growth of 9.8% should have taken the amount of currency available to the public to 19.4 trillion rupees by March, as against the actual availability of 17.5 trillion rupees. On the other hand SBI Research noted that digital transactions have fallen from post-demonetization days. “The apparent shortfall thus could be around 700 billion rupees,” it said.
The Indian government has announced it will increase printing of 500-rupee notes by five times to meet the shortfall.
However, it suspects hoarding of 2,000-rupee notes and a spike in cash withdrawals over the last two weeks as reasons for the shortfall. The Department of Revenue will launch an investigation in this regard.
The current cash crunch has hit a dozen states, including Uttar Pradesh, Madhya Pradesh, Karnataka, Telangana, Andhra Pradesh, Bihar, Gujarat, Maharashtra, Rajasthan and Punjab.
ATM transaction costs to go up
Meanwhile bank customers may be hit as ATM operators have demanded higher interchange rates for ATM transactions to enable them to comply with recent stringent Reserve Bank of India guidelines, reports Economic Times.
Currently all banks charge one another a fee of 15 rupees for each cash and 5 rupees for all non-cash transactions for use of their ATMs by other banks’ customers.
Now, the Confederation of ATM Industry (CATMi) has demanded that this should go up by at least 3-5 rupees per transaction to enable the ATM operators to recover their costs, which they claim have skyrocketed in recent times.