Cash crunch to spill well into New Year, hints government

New Delhi: The government indicated on Thursday that it would start easing restrictions on cash withdrawals only after 80 per cent of the new currency introduced following its demonetisation move was re-channelised through bank deposits. The government said only 50 per cent of the target would be achieved by December-end.

The restrictions will be first eased in case of co-operative banks, followed by other scheduled commercial ones. Long queues have stayed outside low-on-cash banks and ATMs after the Centre started on November 8 replacement of high-value bills to fight black money and fake currency.

Union economic Affairs secretary Shaktikanta Das said that the supply of new banknotes will considerably improve in the next 2-3 weeks. “The government has stepped up printing of Rs 500 notes, and as its circulation increases, people would also take out the Rs 2,000 notes they have been hoarding so far,” he said.

The government’s assurance came on a day when the Supreme Court asked it to explain when people are not able to withdraw the promised sum of Rs 24,000 a week, how some are getting lakhs in new currency, pointing to soaring cash seizures across the country. Government officials later said all efforts were being made to seize illegal money and put it back into circulation to meet common people’s cash need.

Meanwhile, Union finance minister Arun Jaitely told a Parliamentary panel that digital transactions are a parallel mechanism, and not a substitute for cash transactions. “A cashless economy is actually a less-cash economy as no economy can be fully cashless,” he said. The clarification follows the Opposition’s assertion that there was no real “black money windfall” for the economy, and its criticism of the government’s heavy promotion of digital transactions to tide over the cash crunch and boost its tax revenue.  

The Centre announced on Thursday that it would give away daily, weekly and mega cash incentives totaling Rs 340 crores to promote digital payments, starting Christmas Day. Announcing ‘Lucky Grahak Yojana’ and ‘Digi Dhan Vyapar Yojana’, Niti Aayog CEO Amitabh Kant said that both schemes would cover small transactions between Rs 50 and Rs 3,000 to encourage every section of the society to move to digital payments.

The government’s currency replacement move led to a crippling cash crunch, hitting India’s largely cash-based economy and clouding growth prospects. The scramble for cash also caused astring of deaths, prompting an unrelenting Opposition attack on the government and disrupting an almost entire Parliament session.

RBI governor Urjit Patel was heckled at Kolkata’s airport by alleged Congress workers on Thursday. Mr Patel was in the city to meet West Bengal chief minister Mamata Banerjee, who has been at the forefront of protests against the demonetisation move.  

Banknotes worth Rs 15.4 trillion were banned, but only Rs 4.61 trillion has been issued, as per the RBI’s data. An informal black money windfall estimate was Rs 3 trillion or 20 per cent of the R15.4 trillion culled. But Rs 12.44 trillion in banned notes is already back in banks, the central bank said. The deadline to deposits these notes ends on December 30.

The Union finance ministry however doubted the RBI data and asked it to re-verify the same. Mr Das said that the RBI might be “double counting” in some instances.