If people stop making deposits while still withdrawing their money, the banks will face a huge problem wholesale curtain fabric of shortage, and the government should understand this.. One report notes the cash in circulation to GDP ratio stood at 11. The government has said it will investigate the reasons for the shortage. The RBI must answer these allegations as these managers have no motive to make such statements. Another reason cited is hoarding of cash for the Karnataka elections and the 2019 general election. It’s worse because it brings back harrowing memories of demonetisation, when some people even lost their lives as they didn’t have cash for medical treatment. The finance ministry had then said other countries had done this.It’s fear and panic, therefore, that is responsible for the current shortage of funds.
Though this bill has now been shelved following a huge outcry, the government needs to scrap it altogether to convince people about its sincerity.In the blame game raging between the Reserve Bank of India, the note-printing authority and banks over the shortage of currency notes at ATMs, it seems evident that the RBI has failed to meet the demand for currency in line with the economy’s growth. There is adequate imported paper on which currency notes are printed with the RBI, so what’s the reason for this mess? It doesn’t speak well for the country, one of the world’s fastest growing economies, to face a cash crunch mess. While the RBI claims it has been meeting the demand for cash, the body that represents ATM managers say they are starved of cash and are getting only 30 per cent of what they seek.
They rightfully felt when the banks make profits they don’t share it with depositors, so why should depositors pay for banks when they get sick. As the huge amounts needed for elections can’t be withdrawn in one go, politicians may be doing it gradually.Another pertinent reason is the senseless “bail in” clause proposed by the Financial Resolution and Deposit Insurance Bill, whereby people’s savings in banks was sought to be used to bail out sick banks. If this is true, it’s a ham-handed way for the government to push its agenda. People started withdrawing their money and investing in real estate and other avenues as they lost trust in the government.6 per cent, and has now declined to 10. Whatever the reason, the public, particularly in rural and non-metro areas, are facing hardship over this artificial cash crunch.7 per cent. It’s a facetious reason for India to follow suit. There are also reports that this shortage was deliberately created as the government wants people to increasingly switch to digital transactions. The parliamentary committee on finance needs to ask the RBI governor why the cash shortage has arisen
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