Cash crunch set to persist in 2017

As the 50-day deadline for completion of demonetisation process draws near, there is a growing consensus among bankers that the restrictions on withdrawal would have to continue even in the New Year so as to maintain orderly working at the banks. 

Banks at many places are not in a position to disburse even the current limit of Rs 24,000 per week due to cash crunch and are rationing the valid currency depending on cash availability. If this limit is withdrawn for individual and businesses from January 2, it is unlikely that banks would be able to disburse the higher demand for valid currencies given the current cash position. “Most of us think that the withdrawal limit would not be completely withdrawn. It is a possibility that it could be relaxed if the cash situation improves,” said a senior public sector bank official.

At a time when banks are struggling to meet the demand of individual customers, it would be impossible to serve MSME and big corporates which requires cash in large quantity, the official said and added that  the practical way would be to relax it gradually. Recently, SBI Chairperson Arundhati Bhattacharya had also indicated that restriction on withdrawals cannot be lifted entirely unless more cash is made available to banks. 

The government and RBI have not specified when the restrictions would  be withdrawn. Finance Secretary Ashok Lavasa had said the withdrawal cap would be reviewed after December 30. Even banks’ unions are of the opinion that the restrictions cannot be done away with in one go. In all likelihood, the restriction on withdrawals would continue for some more time in the best interest of banks as well as customers at large, said AIBOC General Secretary Harvinder Singh. The situation of currency supply is known to everyone and it would be difficult to lift the limit from January 2, Singh said, adding that SME and small businesses are waiting for cap to go so that they can withdraw as per their requirement. 

Union Minister for Information and Broadcasting M Venkaiah Naidu predicted that bad days would begin to  corrupt people from January 1, and the problems of common man in withdrawing money from banks and ATMs would end. Addressing a seminar on ‘Good Governance’, organised on the occasion of the 91st birthday of former Prime Minister A B Vajpayee here on Sunday, the Union Minister said that the results of demonetistion would start emerging from January 1 as the corrupt people would witness bad days. 

The problems of people in withdrawing money from banks and ATMs would also go away, he said. Naidu said that after the announcement of demonetisation, the pelting of stones in Srinagar, infiltration and drug trafficking were stopped. He dismissed allegations that the demonetisation had benefited Ambani and Adanies and said in fact they were extended Rs 1.80 lakh crore loans during the earlier regime of Congress-led UPA government.