New Delhi, Apr 18: The government today said the Reserve Bank will increase five-fold the printing of Rs 500 notes to deal with cash shortages in certain parts of the country, fuelled partly by hoarding of high denomination currency.
Economic Affairs Secretary Subhash Chandra Garg told reporters the government suspects that Rs 2,000 notes are being hoarded as they are not coming back into the circulation fast enough.
Cash shortage has been reported from Andhara Pradesh, Telengana, Karnataka, northern Bihar and certain other parts of the country, apparently on apprehensions about safety of deposits due to recent spurt in banking frauds.
Observing that there is unusually high demand for currency, Garg said there are multiple factors for this including tendency to hoard cash and it is stronger in some parts of the country.
“There is also a perception that there may be shortage of currency in the future. So people have started withdrawing and it has contributed to the crisis,” he said. “We keep adequate stock of currency notes, which is one-sixth of the currency in circulation.”
Currently the currency in stock is about Rs 2 lakh crore and the reserves are adequate to meet any unusual spurt in demand, he said.
The unusual spurt in currency demand since January was also met through reserves, he added.
Garg said that anticipating a spurt in demand the government has given a push to currency printing.
“We have taken steps to increase the supply of currency in case demand goes up… The currency printing (will increase) from Rs 500 crore to Rs 2,500 crore per day of Rs 500 note.
“So in a month, we will be printing about Rs 70,000-Rs 75,000 crore. This should give you assurance that we are geared up to meet the rising demand,” he said.
Earlier in the day, Finance Minister Arun Jaitley tried to assure public that there was adequate cash to deal with any shortage.
Garg further said the government will make all efforts that there is no shortage of cash irrespective of the level of demand.
On ATMs going out of cash, he said some of them may have some problem, but this is a temporary phenomenon.
“On a given day, one per cent of the ATMs are usually out of order. And it could be a local management issue not a countrywide phenomena,” he said.
On Rs 2,000 notes, Garg said there are about Rs 6.7 lakh crore worth of Rs 2,000 notes in the system and they are more than adequate to meet the transaction demand.
“Rs 2,000 notes are circulating but of late we have noticed there has been lesser inflow coming back in the circulation. We have not got this investigated, but you can assume this is the one note which most suitable to hoard as this is a high value note. But this does not affect the overall supply of Rs 2,000 notes,” he said.
Garg also dismissed rumours that the cash shortage is related to the recent scams in the banking sector, including one allegedly perpetrated by Nirav Modi or the Financial Resolution and Deposit Insurance (FRDI) Bill.
