RBI's 4-fold hike in cash supplies fails to ease payday rush
01 December 2016
A four-fold increase in cash supplies by the Reserve Bank of India (RBI) failed to ease the cash crunch on payday as most of the bank branches and ATMs ran out of cash early in the morning.
The cash shortage continued to persist at bank branches on Thursday, despite the RBI scaling up printing and supply of Rs500 notes to ease the discomfort brought about by Rs2,000 notes.
Anticipating heavy rush on the month's first day, banks had filled up their ATMs with Rs2,000, Rs500 and Rs100 currency notes during the night to ensure that customers could withdraw cash directly rather than queuing up at the branches.
However, banks had a trying time in the morning today catering to hundreds of customers without debit or credit cards queuing up with cheques and passbooks in hand hours before banks opened for transaction.
With the daily withdrawal limit of Rs2,500 from ATMs and Rs10,000 per day or Rs24,000 a week from counters to each customer in force, banks have braced themselves to disperse the permitted amount to as many of their customers as possible.
In fact, banks were demanding that the weekly limit be reduced to Rs15,000 for the time being so that they can offer cash to as many customers
While most private and government offices credit employee salaries to banks, withdrawing cash remained a problem for many.
Major companies in the IT sector like Infosys tried to ease the pain by deploying mini ATMs while some state governments paid employees in part cash.
On the first payday after demonetisation, people thronged ATMs in huge numbers but the cash got over in no time. This was primarily because of the shortage of new Rs500 notes.
Banks say the situation is unlikely to improve as there is shortage of cash from the RBI too. However, the central bank said it will increase the supply of cash.
RBI is supplying cash based on the current flows to bank branches even as rationing of currencies continued. The weekly withdrawal limit is Rs24,000 for savings accounts and Rs50,000 for current accounts.
ATM withdrawals are limited to Rs2,500 at a time from ATMs recalibrated to take new Rs500 and Rs2,000 notes. Those that haven't been reprogrammed will dispense Rs2,000 at a time.
RBI has also to meet other normal cash demands from current account customers which cannot be ignored as it affects economic activity more.
RBI operates a total of 4,075 currency chests across the country, of which, State Bank of India and its associates manage more than half while other public sector banks manage 1,173 chests and private sector banks run 160.
Meanwhile, banks are pushing the use of point of sale (PoS) machines to enable cardholders to make transactions and also to withdraw money.
HDFC Bank has signed a deal with Federation of Retail Traders' Welfare Association to provide cash at PoS machines to cardholders. Following this, some marquee outlets will be allowing customers to swipe cards for cash.
Deployment of PoS machines will greatly help retail stores to deal with customers using debit cards. The cash dispensation initiative will also help masses easily withdraw cash and reduce inconvenience.