The government today said it has stepped up printing of currency notes in the system by five times amid reports of an acute cash shortage in certain parts of the country.
There is a spurt in currency demand, Economic Affairs Secretary Subhash Garg told reporters today. Additional cash is being supplied to meet the demand and Rs 500 currency notes worth Rs 2,500 crore are being printed every day, he added. That adds up to Rs 70,000-75,000 crore worth of notes in a month. Banking Secretary Rajiv Kumar had indicated earlier in the day that there is a shortage of Rs 500 notes in the system which will remain for five to seven days.
There is currency worth Rs 1.75 lakh crore in reserve, the economic affairs secretary said. The government had stopped printing Rs 2,000 notes in the last few months as it had adequate stock worth Rs 6.7 lakh crore of these notes, he said.
There is a trend of high-value notes being hoarded as Rs 2,000 notes are being circulated but not returning to the system, Garg said. “We have not got this investigated, but you can assume this is the one note which is most suitable to hoard as this is a high value note,”
Finance Minister Arun Jaitley has assured citizens that the cash crunch that some parts of the country were facing was temporary and will be resolved soon. That shortage is reminiscent of the period after Prime Minister Narendra Modi withdrew old high-value notes worth 86 percent of the currency in circulation to tackle unaccounted wealth in November 2016. The level of cash, according to the central bank, is now close to the pre-demonetisation level at Rs 18.4 lakh crore as of April 6. But in terms cash-to-GDP ratio, it’s still lower at 10.9 percent compared to 12 percent before the note ban.
According to Garg, the government generally keeps a sixth of the currency in circulation in stock, and it has the wherewithal to deal with a situation where the demand for cash in the country doubles from current levels.
He said the government is still analysing the reasons for the shortage reported in five states, ruling out elections in Karnataka as the only reason for the spurt in demand. A committee which includes the government and Reserve Bank of India officials reviewed the situation on Monday, Garg said.
The government issued a statement saying that it is supplying adequate currency notes to meet even higher levels of demand if such demand continues in future. “The government is taking all steps to ensure that ATMs are supplied with cash and to get non-functional ATMs normalised at the earliest,” it said.