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Lines in front of bank branches and ATMs are going to be even longer in the next few days. As salaries are likely to be credited in the accounts of employees, the rush to withdraw money to pay bills is going to increase manifold.
Even with multiple restrictions in place, people withdrew, on an average, Rs 12,742 crore everyday since 10 November. If past trends are any indication, the demand for cash increases by at least 5 percent in the first week of every month.
Reserve Bank of India (RBI) data reviewed by The Quint shows that in the first week of August and September this year, total balance in current accounts held with all scheduled commercial banks dipped by nearly 5 percent in the first week only to recover in subsequent weeks.While a section of government employees has the benefit of getting a part of salary in cash, scores of others will depend on the banking channels to meet their demand.
It is likely that most of the withdrawal would have happened to meet salary expenses. In the absence of any reliable data on weekly withdrawal from banks, the data give us a fair sense of how demand for withdrawal surges in the first week of every month.
If that is the case, expect a demand for at least 1 lakh crore rupees in the first week of December. Such a surge in demand is likely to test the liquidity situation of banks.
While banks started rationing demand in the run up to the pay week, bankers and experts say that given the liquidity situation in the country, the salary week demand is unlikely to be met.
“The supply of notes of 100 rupee denomination has almost dried up. All we get from currency chests are bundles of Rs 2,000 notes. It is tough for us to convince customers to take high denomination notes, more so when the supply of Rs 500 notes is almost negligible,” a middle level banker with a government-owned bank told The Quint.
The banker says that branches have been getting 10 to 30 percent of their daily cash requirements from currency chests at the moment.
Since we have not faced such a situation before, there is a mad rush for currency chests too and that is an additional headache for us.
As a result, many branches shut shop hours before the scheduled closure. Many banks do not give more than Rs 5,000 to their customers.
“We have a real tough time turning down requests from our valuable customers. And it is very frustrating to say no to customers who we know urgently need some cash,” a banker with a leading private sector bank told this reporter.
Experts say that while current central government employees have some cushion in the form of cash advance, it is going to be really tough for nearly 5 million pensioners.
No wonder, many retired servicemen The Quint spoke with were very critical of the implementation of the demonetisation. “The currency ban move is good. However, had more Rs 500 notes arrived sooner, there wouldn’t have been so much of a problem. Additionally, many ATMs are already non-functional and have still not been fixed,” a Rewari-based retired army jawan told us.
To shorten serpentine lines in front of banks and ATMs, the government authorised 256 Big Bazaar outlets, 25,000 petrol pumps and 1.3 lakh post office branches to dispense cash.
All these do not seem to have had the intended effect so far.
“The real problem is not reaching outlets to get cash. There are many of them now. There are not enough new currency notes in the system to dispense,” the banker with the PSU bank said.
With the supply of new Rs 500 notes still erratic, the situation is unlikely to improve any time soon.