Table of Contents
CASH CRUNCH IN INDIA
Last 2 weeks: facing acute shortage of currency.
• ATMs have gone dry
• People are angry about it
•Government claims that there is enough
cash with the banks.
Cash Crunch
Assam
Andhra Pradesh
Telangana
Karnataka
Maharashtra
Rajasthan
Uttar Pradesh
Madhya Pradesh
• MoS Finance SP Shukla: Rs 1,25,000 crore with Govt.
• Problem: some states have less currency and others have
more
Govt has formed state-wise committee RBI also formed committee
• Contrary to the central bank’s claims that the problem is temporary
• there’s been around 30-40% cash crunch in the country.
• AIBOC: emerged due to the RBI’s constant pressure towards digital economy.
• A month back, the Reserve Bank disallowed banks from moving excess cash in one circle to deficient circles.
• Banks are saying the RBI is providing more of Rs 200 and Rs 100 notes.
Festivals Payment of wages
Elections ATM Recalibration
• The association also claimed people across the country are fearful over the proposed the FRDI (Financial
Resolution and Deposit Insurance) Bill, 2017, which proposes to create a framework for overseeing financial
institutions like banks.
•It said people are hoarding money, especially Rs 2000 notes, instead of depositing it in banks.
• The association added the RBI itself is holding back cash to push people towards using digital systems to make transactions.
• Major reason behind cash hoarding: lack of clarity on possible changes in the banking system.
• The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency.
• Main duty of this Resolution Corporation, as per the draft bill, would look after the process and prevent the banks from going bankrupt.
• Tool: “writing down of the liabilities“ aka “bail in” , as per the provision of the FRDI bill, the resolution corporation can bail in a bankrupt financial institution.
• Bail-out: government can use public money deposited in banks to revive economy
• Bail-in: it authorizes the Centre to take out the public money to revive a failing bank.
Banks account holders Government
• At present, all deposits up to Rs 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act that is sought to be repealed by this bill.
• 21 December 2017 FM in LS: all depositors’ money in public sector banks will be protected and there is no need to create any fear psychosis.
• The government is yet to take a final call on insurance amount in the latest bill.
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