With India’s banknote shortage spreading across the country, the government said Tuesday (April 17) that there is enough currency available and that there are moves being made to print more currency.
According to a report in Bloomberg, the Finance Ministry had government officials come out to ease concerns of Indians as cash machines around the country run dry. Many remember the move by the government in November of 2016 to take high denominated currency out of the market to curb corruption. That resulted in a run on the banks and India’s focus on moving to a cashless economy. “Our first order of response is to make sure that adequate cash is available at ATMs and in banks so that demand, for whatever reason it is there, is met,” Sanjeev Sanyal, Modi’s principal economic adviser, and a former Deutsche Bank global strategist, told BloombergQuint in an interview. “There is no crisis, the banks are in perfectly good shape, we have more than adequate cash and more will be printed if necessary. So there is absolutely no need for anybody to panic about this.”
Bloomberg reported that the reasons for the cash shortages are varied, but one of the main ones is concerns from the public, which is losing faith in the banking system and thus loading up on cash. Indians are worried about a bill making the rounds which would enable regulators to use public deposits to bail out banks. That is prompting individuals to withdraw cash. “The country is moving to a very risky scenario as this cash crunch erodes faith in the banking system,” said C.H. Venkatachalam, general secretary of the All India Bank Employees’ Association, which represents about 1 million bank employees said in the Bloomberg report. “If the situation continues for another week, we fear for the safety of bank employees” in the states that the cash shortages are happening. Also adding to the concern is the fraud at Punjab National Bank, the state bank that issued fake loans. That has further eroded trust among Indians.