While people suspect PM Modi, bankers say deposits in the Telugu states are curiously drying up fast
This Sankranti, the people of Telangana and Andhra Pradesh, have been cursing Prime Minister Modi. Because ATMs in both states have run dry, stranding many residents.
The public uproar is so severe that even bankers in both states are blaming it on the Centre’s policies rather than their own inadequacies and short-sightedness.
Money is no constraint in these two states when it comes to Sankranti – visits to their native villages for festivities are a lavish feature of the harvest festival. But this season they were in for a shock.
ATMs refused to roll out currencies since last week and hundreds were stranded in bus stands, railway stations and airports in Hyderabad, Visakhapatnam and Tirupati as they were unable to get cash for expenses, though they had booked tickets. Some had to give up darshan of Lord Venkateswara since only cash is accepted at the temple.
Before the cash dried up, cards were swiped for buying gifts and jewellery at an additional 2% surcharge. “As we swiped the card, the traders refused to give festival discounts,” said Saroja Shetty, a techie at Hyderabad from Eluru, highlighting the advantage of cash transactions during festival season.
Cashless ATMs brought back nightmares of the demonetisation days in 2016 when currency was hard to find. Suspicion automatically turned to the Prime Minister who had made the late night shock announcement of demonetisation. “I don’t know, it may also be a Modi stunt to promote cashless regime during festival seasons,” said Nirmal Rao of Hyderabad, who waited for hours at various ATMs for cash. Rao had a bus to catch at MGBS station in Hyderabad to go home to Kurnool.
Bankers of the two states have expressed helplessness as there have been huge withdrawals from all branches and ATMs drying up within minutes of being filled. Long queues were visible everywhere. “Whatever cash was loaded into ATMs quickly vanished because of a huge scramble for money for festival expenses,” said V Mohan, manager of an SBI branch at Vijayawada.
Some bankers blamed it on the scare of the FRDI (Financial Resolution and Deposit Insurance) Bill coming up in the Budget session of Parliament which liquidated the cash in savings accounts and term deposit accounts of customers. Rumours spread that in the event of a bank going bankrupt, account holders would be insured for a maximum of Rs 1 lakh only, irrespective of the amount in their accounts and fixed deposits.
But most bankers agree that currency shortage in ATMs to insufficient flow of deposits from the public. Huge withdrawals of cash from banks for investment in gold and real estate over the three-day Sankranti holidays made the situation more severe.
With no currency available, the poor and lower middle class once again fell prey to private money lenders and paid them cash loans at 1-2% interest. Though the RBI and government announced that there would not be any transaction cess on purchases below Rs 2000, traders continued to slap 2% extra for swiping cards. “I will get credit for digital transactions after 15 days. So 2% is interest for my products. If you don’t want to pay that, please pay in cash,” was the argument of every trader, even in big cities like Hyderabad, Karimnagar, Nizamabad, Tirupati, Bangalore, Vijayawada and Visakhapatnam.
“Yes, there is a severe currency crisis. The notes going out are not coming back to the banks. The chain of deposits and withdrawals has snapped in both of these states for reasons not known which is being probed,” said a senior Assistant General Manager of RBI, Hyderabad who wished to remain anonymous.
The unprecedented cash shortage has also left bankers baffled. “It is a one-way traffic,” said a senior official of the State Bank of India, Visakhapatnam. Banks are now depending on the account holders of petrol bunks and wine shops who regularly pour in cash on a daily basis. Banks have arranged to collect the cash at their locations thrice a day to speed up cash availability in banks and ATMs. Banks have also urged the government and police to allow these outlets to run on 24×7 basis to meet cash needs.
Though Reserve Bank of India officials in Hyderabad refused to comment further, last month Regional Director R Subramanian had informed a year-end review meeting that about 32% of the 8462 cash dispensing machines in Telangana and AP were inactive. And now the low cash flow had led another 30% to shut doors for customers, say bankers in both states.
Over the past three months, banks in both the states had imposed an undeclared restriction on the withdrawals with the rise in withdrawals and low deposit trend. It is also reported that bank customers prefer premature withdrawal of term deposits as well. The normal practice of 60% of the total cash disbursals in the form of deposits had fallen to 20%. The apex bank’s decision to cut cash supplies gradually since last August to augment digital transactions has added to the Sankranti bonfire.
The undeclared restrictions on withdrawals were a maximum of Rs 5000 in semi-urban and Rs 10,000 and Rs 30,000 in cities. The mandatory practice of cash reserves of Rs 60 lakhs in each branch has touched the level of Rs 20 lakhs now. “This situation is expected to continue for another 10 days,” said S Manikandan, Convenor, Telangana State Level Bankers’ Committee and SBI General Manager.
Both Telugu states had been adjudged the star performers in the aftermath of demonetisation in 2016 and topped the country in the shift to digitisation and e-transactions. Telangana had reported 9.79 crore e-transactions while Andhra Pradesh topped with 13.42 crore e-transactions.
Telakapalli Ravi, a Hyderabad-based economist says that digitisation was forced upon the two Telugu speaking states by the Centre and the acute cash crunch is now resultant of that drive for e-transactions.
Obviously, after the initial thrust, the people wanted to resort to old ways for Sankranti but failed to do so. Even the Telangana Chief Minister had noted the pain of cashless regime during the festival days. “Cash is not available in banks and people are facing hardships,’ he had said to mediapersons after his regular festival greetings.
Political sources also contend that the Centre had diverted cash supplies to six states where Assembly elections were due in the coming months. “There is no cash crunch in Karnataka which is going to polls along with Nagaland, Mizoram, Chhattisgarh, Madhya Pradesh and Rajasthan,” said Telangana Congress Committee President Uttam Kumar Reddy. Blaming the NDA, he said that all constitutional bodies like the Supreme Court, CBI and now the RBI were under political pressure.