A situation, supposedly similar to the one India faced in the days that followed the demonetisation announcement, surfaced in the country this week, with several ATMs running dry and banks putting up notices stating their ATM kiosks are not functioning.
ATM and point of sale (PoS) system service providers Firstpost spoke to shared a slew of reasons for the cash crunch. Primarily, banks have been unable to comply with the indent raised by service providers, raised on a daily basis to replenish ATMs, they said.
The cropping season is another reason for a shortage of cash, they said. Owing to the cropping season in Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar, a large numbers of farmers in those states are withdrawing cash for transactions, contributing to the resultant cash crunch.
Another reason is that people in rural areas continue transacting in cash, as the technology for digital transactions in the hinterland is woefully inadequate. “Cash makes them feel confident than using the internet or mobile transactions,” said Navroze Dastur of NCR Corporation of India, the largest deployer of ATMs in India.
A fourth reason provided was that large sums of money have been withdrawn by political parties ahead of the election season, thus helping trigger the cash shortage situation in the country.
Several cities and towns stand affected. Service providers said that while the current situation with regard to ATMs is far from normal, they are able to meet about 70-80 percent of customers’ requirements.
With banks giving their service providers almost 40-50 percent less cash for ATMs, currency is rationed to ATMs depending on the locality and the demand for money, said V Balasubramanian, the spokesperson of the Confederation of ATM Industry. Furthermore, many banks do not have cash chests and these have to be moved from other states, he said, adding that there is no shortage of cash in ATMs in Kerala and Tamil Nadu.
But in Andhra Pradesh and Telangana, since February, public sector banks have been able to give only 60 percent of the cash needed for ATMs, said Balasubramanian. However, private banks in the two states have been able to honour 90 percent of the indent raised.
Sharing details about the spike, Economic Affairs Secretary Subhash Chandra Garg told reporters on Tuesday that the first 13 days of April witnessed a demand of Rs 45,000 crore as opposed to an average demand of some Rs 20,000 crore in a month.
Garg said there was no cash crunch in the country, pointing out that currently around Rs 18 lakh crore worth of currency was in circulation. "We keep Rs 2.5-3 lakh crore more currency in stock for excess demand. In the last few days, we have pumped cash into the system to meet the demand. We still have a reserve of Rs 1.75 lakh crore."
Earlier, Finance Minister Arun Jaitley tweeted that there is ‘more than adequate currency’ in circulation. He said: "Have reviewed the currency situation in the country. Overall there is more than adequate currency in circulation and also available with the banks. The temporary shortage caused by ‘sudden and unusual increase' in some areas is being tackled quickly."
Have reviewed the currency situation in the country. Over all there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by ‘sudden and unusual increase’ in some areas is being tackled quickly.
— Arun Jaitley (@arunjaitley) April 17, 2018
How ATMs are stocked
ATM service providers provide an indent to banks. By noon, on a working day, an indent is raised and given to the bank with a cash forecast, for ATMs, for the next day. The following day, service providers collect cash from banks and transport the same in vans. One van can replenish around 20 ATMs. Vans start loading money from 10 am and finish their rounds by 5 pm.
As of February 2018, public sector banks operated 1,45,846 ATMs (83,632 onsite and 62,214 offsite) while private banks operated 59,873 ATMs (23,783 onsite and 36,090 offsite).
Updated Date: Apr 18, 2018 15:03:28 IST