P Chidambaram, Congress leader and former Finance Minister of India (Photographer: Namas Bhojani/Bloomberg News)

Chidambaram Blames Cash Crunch On Loss Of Confidence In The Banking System

The cash shortage in certain Indian states is a fallout of the recent banking frauds in the country. That’s according to the former finance minister P Chidambaram.

“I suspect ordinary people are withdrawing cash but not putting back into the banks their surplus cash,” Chidambaram said in a series of tweets. “It is possible that there is some loss of confidence in the banking system, thanks to the bank scams.”

Reports of ATMs running dry over the past couple of weeks have emerged from Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar. The government and Reserve Bank of India officials attributed the shortage to unusual local demand. Finance Minister Arun Jaitley called the cash crunch a “temporary shortage”. This has been pegged to various ranging from elections to cash hoarding, and farm payout during the procurement season.

The RBI said that its largely because of logistical issues of replenishing the ATMs.

In a string of tweets, Chidambaram said that the RBI’s defence was unsatisfactory. “If RBI has printed and supplied sufficient cash, it must explain why there is a cash shortage,” he tweeted.

Also read: BQ Explains: Why Your Nearest ATM May Be Short Of Cash

The senior Congress leader added that the “ghost of demonetisation” had come back to haunt the government and the banking regulator. “Why are ATMs still bring re-calibrated even 17 months after demonetisation,” he questioned.

He added that the government or RBI cannot arbitrarily control the supply of cash. "A government is obliged to provide as much cash as the people need at any given time," Chidambaram said.

Also read: Government Steps Up Currency Notes Printing Amid Cash Crunch