Cash transactions are back in vogue despite the government’s push for a less-cash economy post-demonetisation, Reserve Bank of India (RBI) data on ATM cash withdrawals indicate.
Withdrawals from ATMs in March this year stood at 2,259 billion — 0.6% more than what people withdrew in the same month last year. This rate of growth is much lower than that in the corresponding period in the previous year— an increase of 11.4% for March 2016 as compared to March 2015.
But this could be attributed to many ATMs being reported either dysfunctional or short of cash even four months after Prime Minister Narendra Modi’s November 8 announcement to recall the old Rs 500 and Rs 1,000 notes. Besides, it was only on March 13 that the RBI lifted all cash withdrawal limits.
“March trends show that people are getting back to their old habit of using cash and the withdrawals have touched the same level despite restrictions and inadequate cash supply,” economist Nirupama Soundararajan of Pahle India Foundation told HT. In December 2016, when there were many restrictions in place, only Rs 849 billion was withdrawn.
When contacted, minister of state for finance, SS Gangwar refused to comment on the issue. Other top officials of the ministry, too, did not respond.
“The country was not fully prepared for moving towards digitisation through disruption and now data seem to suggest that people may be getting back to hoarding cash for emergency situations, the same way as during the pre-demonetisation period,” Ashvin Parekh, managing partner, APA Services, said.
As a result of demonetisation, Rs 15.4 trillion was sucked out of the system. While the central bank hasn’t yet revealed how much of that has returned to the banking system, many of the country’s 220,000 ATMs are yet to return to their normal level. “There is a shortage of cash and now demand for cash is almost back to what it was during the pre-demonetisation period. Only 60% replenishment is possible with the current cash supply,” NSG Rao, secretary of Cash Logistics Association, told HT.
Post-demonetisation, the Modi government laid thrust on moving towards a less-cash economy, promoting e-wallets and even announcing cash awards for both consumers and merchants adopting digital payment modes.