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. 
Sucheta Dalal
6 years 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
Pradeep Kumar M Sreedharan
Replied to Sucheta Dalal comment 6 years ago
Signed and shared to thousands. Again and again.
Pradeep Kumar M Sreedharan
6 years 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
6 years ago

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shrikant sundaram
6 years 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
6 years 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
6 years 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.
6 years 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
6 years 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
6 years 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
6 years 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.
Radhakrishnan Machat
Replied to Simple Indian comment 6 years 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
Replied to Radhakrishnan Machat comment 6 years 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.
6 years ago
Savvy enough to tweet, cant cut down cash usage?
Abhijit Gosavi
6 years 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?!
6 years 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
6 years ago
As soon as elections are over I think government has started neglecting the citizens as they always do
Radhakrishnan Machat
6 years 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.
Pradeep Kumar M Sreedharan
Replied to Radhakrishnan Machat comment 6 years ago
Less than 30%
Radhakrishnan Machat
Replied to Pradeep Kumar M Sreedharan comment 6 years 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!
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