Indian banks are facing another massive cash crunch

ATM withdrawals are surging as the country still reels from the 2016 demonetisation.

Bloomberg reports that India may be facing another cash crunch as ATM withdrawals have surged in recent months, prompting the government to assuage the public still reeling from the 2016 demonetisation of sufficient reserves to meet rising demand.

Cash withdrawals surged 12.2% in the second half of the year ended March 31 which particularly manifested in some parts of the country like Andhra Pradesh, Telangana, Karnataka, MP and Bihar. Cash levels never fully recovered from Prime Minister Narendra Modi’s overnight decision to demonetise ₹500 and ₹1000 bills in 2016.

“There has been unusual spurt in currency demand in the country in last three months,” according to a statement released by the Ministry of Finance. “In the current month, in the first 13 days itself, the currency supply increased by Rs.45000 crores.”

The public also remains on the edge following the $2b fraud at state-run Punjab National Bank which has been touted as the country’s largest bank fraud in recent memory.

Also read: India to merge 35 overseas branches of state banks following $2b fraud case

“Trust in the banking system has hit an all time low,” said Kranthi Bathini, director of Mumbai-based financial advisory company WealthMills Securities Pvt.

Also read: Can India ease its bad loan woes before another banking scandal erupts?

However, the government was quick to assuage the public that it has enough reserves of currency to meet rising demand. “We continue to have in stock adequate currency notes of all denominations, including of Rs.500, 200 and Rs.100 to meet any demand,” the MIF added.

“The Government is taking all steps to ensure that ATMs are supplied with cash and to get non-functional ATMs normalised at the earliest,” it added.

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