Over the past few days, citizens in a few of India’s states have had a sense of deja vu. They’ve walked up to automated teller machines or bank branches and realised that they can’t withdraw their money. The last time they felt this was when the government announced in November 2016 that it was withdrawing 86 percent of the currency in circulation.
The experience of not being able to access their own money, not a pleasant one to be sure, has caused irate customers to create a ruckus at several bank branches across the affected states, according to CH Venkatachalam, general secretary of the All India Bank Employee Association.
Faced by criticism, particularly from the opposition, the government has said it is working to resolve the shortage of cash quickly.
The Reserve Bank of India has said the shortage “in some pockets” is mainly because of certain logistical issues faced during the replenishing of ATMs.
There is also a suggestion that the low velocity of the Rs 2,000 note has caused some of the shortage.
Economic Affairs Secretary Subhash Garg said there is a trend of high-value notes being hoarded as Rs 2,000 notes are being circulated but are not returning to the system. “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.”
Economists have hazarded various theories as to why the shortage occurred. According to Abhishek Upadhyay, economist and fixed income strategist at ICICI Securities Primary Dealership, the requirement of cash during remonetisation might have been underestimated. If one were to chart the requirement for cash based on growth in cash in circulation from before demonetisation, the number would amount to around Rs 21-22 lakh crore, he said.
In the beginning of April, this number stood at Rs 18.4 lakh crore.
Venkatachalam also contends that the recalibration of ATMs has not been completed in several locations, so as to allow the use of the new Rs 200 notes. He adds, based on inputs from members of his union, which numbers over 5 lakh, that the shortage of cash is far from resolved.