HomeFinance NewsSufficient cash in the system, says SBI chairman

Sufficient cash in the system, says SBI chairman

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By CNBC-TV18 April 18, 2018, 1:55:27 PM IST (Updated)

Rajnish Kumar, Chairman of the State bank of India

, spoke about the lack of cash in ATMs across seven states in the country. Saying that he Reserve Bank had supplied sufficient cash over the last year, he added that about 55% of ATMs had been configured to dispense the new Rs 200 notes.

He, however, had no answer as to why cash withdrawals had seen a sudden spike from January to about Rs 18.29 lakh crore.

Here is the edited excerpt from his interview:

Reema: Can you tell us what seems to be the key problem that ATMs are running dry and we are facing this cash crunch?

Rajnish Kumar: Just to give one statistics, the currency in circulation after demonetisation is Rs 18.2 lakh crore in March 2018. Pre-demonetisation level was Rs 17.9-17.8 lakh crore. So it means that the currency in circulation in the country is absolutely sufficient. But there are certain states like the state of Madhya Pradesh (MP), Telangana, Andhra, even Punjab where because of the procurement season, the demand of the cash, there is a crunch.

So we have to do some balancing act. There are some of the states where the currency is available in the currency chest, so we have to move some currency from one state to another. For security reasons, obviously I cannot tell you the name of the states.

So an emphatic statement, which I can make is that as far as the currency with the public is concerned and with the banks is concerned, it is more than pre-demonetisation level, which is enough to meet the requirements of the economy.

About the ATMs also, I review the position every evening and morning what is the availability. This is my normal drill, it is not that I have started doing yesterday or day before. That is the drill we have been doing channel availability is one of the issue which we have to ensure from the customer service point of view also. So channel availability also ranges between 84 percent and 88 percent, which is more or less a normal situation. But in certain geographies, as I said that if the demand for cash has gone up then we have to do a little bit of balancing act also that from the branch, whether we meet the requirement or we meet the requirement through ATMs.

The situation on the whole, I would say - that a little bit of imbalance here and there - in any case bank is adjusting and RBI is also on constant touch.

Latha: Why should only this year’s procurement create a problem? We have seen procurement for years now, four decades of my existence, I have seen procurement. We have never heard of a cash crunch during procurement. Is the supply of cash lower, is there any issue in terms of printing and supply of notes?

Rajnish Kumar: I have given you the statistics. Rs 18.29 lakh crore.

Latha: What is Rs 18.29 lakh crore, currency with the public you mean?

Rajnish Kumar: Yes.

Latha: I looked up the numbers, it is Rs 18.29 lakh crore and in January it was Rs 16.3 lakh crore. The increase is about Rs 1.2 lakh crore, it was Rs 17.99 lakh crore as of March 31. That means about Rs 1.8 lakh crore has been withdrawn. This is unprecedented, why would people withdraw so much? Even before demonetisation, we had hit a high of Rs 30,000 crore a month but now we are going over Rs 40,000 crore a month. Why would people be withdrawing so much cash? Is this the return of black economy?

Rajnish Kumar: No, that is a question for which honestly I will not have a ready answer. It needs to be analysed but the cash is within the system that you will agree and that is what precisely the point I am making and I am making it through your channel, I am making it through other channels also that if there is no shortage of currency, why should people withdraw and not bring it back to the banks if they are doing so. So let there be no holding of the currency, let it be coming back to the bank and I am assuring that whatever money public wants to withdraw, that money will be made available by State Bank of India. So obviously, is there an attempt and that is for maybe because I always have the situation before me of SBI currency chest position, but this is something which – the point I am making - needs to be looked into that why should the cash in certain geographies not come back to the system or if there is a system in the cash overall then why should there be a need to draw more cash.

At one point, everybody agrees that the currency is more than what it used to be earlier.

Latha: Absolutely, not just that, it is alarmingly high, the extent of withdrawal. If what you say Rs 18.29 lakh crore is right, I just looked up the RBI website for January 5, the currency in circulation is Rs 16.29 lakh crore which means Rs 2 lakh crore of currency has been withdrawn by citizens in the last three and a half months. We are running at Rs 50,000 crore cash withdrawal a month. Have you had talks with the government with RBI, is this got anything to do with this Financial Resolution and Deposit Insurance (FRDI) bill and bank fraud and people having a fear or is this something else that people are paying for probably services of parlours and tuition teachers and chartered accountants and doctors and lawyers in cash because you want to avoid 18 percent GST. There should be a larger reason, people will not withdraw unnecessarily.

Rajnish Kumar: Unless I have all the facts that why it is happening, this requires some deeper analysis and I will ask my chief economist also to do some analysis and do some number crunching before we can also find the rationale but as of now, because yours is a very respected channel, my appeal to the public is that there should not be any panic situation. There is sufficient currency in the system and this currency needs to be circulated.

Latha: You have any idea in terms of numbers, how many ATMs are running or how many branches have fallen short?

Rajnish Kumar: Our availability of ATMs from different geographies varies from 84-88 percent.

Latha: So 10 percent shortage for many areas?

Rajnish Kumar: That is normal. We can never have 100 percent ATMs running. That is not physically and technically possible and like if we achieve in any month or any day, a 90-92 percent availability, we consider it to be excellent.

Latha: there are some people who are guessing that the ATMs were not calibrated for the new 200 rupee note, is that an issue at all or people are making up excuses?

Rajnish Kumar: No, that calibration is going on and for SBI, about 55 percent ATMs have been calibrated for 200 rupee note and this exercise is going on but I think what people need is probably 500 rupee notes more. So an ideal combination will be 500, 200 and 100. So on select locations, we have ATMs for even 2000 rupee notes but most of our calibration will be in these denominations.

Latha: Has the supplies from the currency chests been as they were in the past ten years, is it growing at an organic pace, has there been any shortfall in supply at all in the last two-three months for any reason?

Rajnish Kumar: No, the reason you yourself are saying.

Latha: I spoke about withdrawal, I am asking you in supply terms, has there been any change at all, either less or more?

Rajnish Kumar: No, in last one year, RBI has supplied a sufficient currency.

Latha: So supplies is not to blame. It is the extra demand to blame you think?

Rajnish Kumar: Yes.

Latha: When do you think situation can be restored to normalcy?

Rajnish Kumar: The normalcy – some movement we are doing internally from one geography to another where we are finding that there is imbalance. RBI also because they are also aware of the problem. So from one bank to another, those movements are also happening and I hope that the situation should improve in next two-three days wherever there is a shortage but it is not across the country.

Latha: Specifically which is the pocket according to SBI?

Rajnish Kumar: It is Andhra, Telangana, MP and North Bihar.

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