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For the last few weeks, several states especially BIMARU states have reported shortage of currency. Now similar reports are coming from eastern Maharashtra, Bihar and Gujarat too. The government is checking with banks and the Reserve Bank of India to ensure adequate supply of currency. Sources in the finance ministry said the cash crunch was not alarming and there was no need to panic.
Finance Minister Arun Jaitley said that there was more than adequate currency in circulation and also available with the banks. He blamed ‘sudden and unusual increase’ in cash withdrawal for the situation. We have cash currency of Rs 1,25,000 crore right now.
There is one problem that some states have less currency and others have more. A panel has been formed and the matter will be fixed in three days,” said SP Shukla, Mos Finance.
We explain how the currency problem originated in the southern states and the reasons why it could be spreading to other states.
A certain provision in the proposed Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 sparked a rumour that the money would not be safe in banks if the Bill became a law. Even though the government clarified that there could be no such consequence, the rumour drove people to ATMs and bank branches to withdraw money. Several bank loan scams coming to light led to more rumours that certain banks could fail. These rumours created a situation similar to a bank run
