As ATMs run dry, SBI Research pegs cash shortfall at ₹70,000 crore

A part of cash crunch at ATMs could be the introduction and acceleration in printing of ₹200 notes, says SBI Research

Even as the government and the Reserve Bank of India (RBI) have asserted that there is no currency shortage, SBI Research on Wednesday pegged the cash shortfall in the system at ₹70,000 crore, which is a third of the monthly withdrawals at ATMs.

A "no cash" sign on an ATM machine in New Delhi. on Tuesday, people complained ATMs in several parts of the city had run out of cash.(AP Photo)

In a note that comes a day after reports of currency shortages made national headlines, SBI Reserach said it depended on nominal gross domestic product (GDP) growth, currency with the public and the rise in digital transactions to arrive at the shortfall estimate.

A 9.8 per cent nominal GDP growth would have taken the currency available with the public to ₹19.4 trillion by March 2018, as against the actual availability of ₹17.5 trillion, it said, stressing that the gap of ₹1.9 trillion is not the shortfall.

The proportion of digital transactions stands at a low ₹1.2 trillion, way lower than the immediate months following the November 2016 note ban. “The apparent shortfall thus could be around ₹70,000 crore or even less,” it said.

The note estimates that ₹15,291 billion was withdrawn from ATMs through debit cards in the second half of fiscal year 2018, which is 12.2 per cent growth over the previous six months.

Reacting to reports of the currency shortage, SBI Research said the currency in circulation has breached the pre-note ban levels of ₹17.84 trillion and added that such reports are “intriguing and defy logic”.

The report explained that a part of the reason why the shortage is being felt could be the introduction and acceleration in printing of ₹200 notes.

“This may have altered the demand for smaller denomination notes in a larger way to possibly substitute for the currency of larger denominations,” it said. “As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available,” the report added.

RBI in a statement on Monday attributed the shortage to “logistical issues” in both replenishing ATMs with cash and also recalibrating the ATMs to accommodate ₹200 notes.

The higher level of economic activity in the fourth quarter may have also resulted in more withdrawls at ATMs, the SBI Reserach report said.

SBI Research also dismissed notions that demand for cash had risen due to proposals in the Financial Resolution and Deposit Insurance Bill, saying those were mooted over five months ago. The most contentious part in the Bill is a suggestion to have a “bail-in” provision, which if incorporated result in the cancellation of a liability on the part of the bank and can extend to deposits.