The Indian ATM Drought: Government Strategy or Public Panic?

Recently, there has been a surge in public concern regarding the ATM cash drought in India. The issue has sparked debates on governance, speed of relief measures, and the future of the Indian economy. Many question whether the government's objective is to manage cash circulation or to push the country towards a cashless society.

Government Policy and Public Reaction

Prime Minister (PM) Modi has put a temporary instruction for banks to avoid filling their ATMs with cash on holidays, aiming to encourage responsible spending habits among the general public. This move is seen as a strategic decision to reduce cash circulation, which could result in increased deposits in banks and, in turn, higher profits for financial institutions.

However, this decision has been met with skepticism and criticism. Some argue that limiting ATM availability on public holidays could negatively impact daily life and reduce spending, hindering the economy's growth. Others believe this move might be a measure to ease the burden on banking systems and transition towards a cashless society.

The Mathematics and Myths Surrounding Demonetization

Coinciding with the PM's instructions, the government recently banned a large amount of currency, rendering 2400 crore individual currency notes as illegal. Despite the ban being a significant move, the actual impact has been ambiguous due to the Government's actions and the RBI's role.

The Government claims that it would take 8 months for the 4 presses to print the equivalent number of notes, not considering the additional time required for recalibrating ATMs if the size and shape of the notes change. However, 97% of the banned currency quickly returned to the economy, significantly undermining the efforts to curb black money and corruption.

Current Status and Future Outlook

Despite the Government's efforts to reduce the circulation of hard cash, there remains a significant deficit in cash supply. Even as 15,000 crores in currency were withdrawn from circulation, there is still a shortfall of around 4 to 7 percent of the total money that was taken out.

Some experts believe that the root issue lies in the RBI's slow printing process and insufficient currency supply. It is clear that the current cash shortage does not result from a lack of demand, as there are complaints about ATMs being empty, causing inconvenience to the general public. However, the Government's primary aim is to shift the country towards a cashless society, which requires a robust digital infrastructure and a change in public behavior.

Expert Insights

Many individuals, including bank employees, have shared their observations. For instance, in banks like IDBI, ATMs are typically refilled within one day of any issues. The RBI has strict instructions for banks to avoid long-term ATM closures and to ensure that ATMs are refilled as soon as possible. This reflects the Government's willingness to address public concerns and ensure that banking services remain accessible.

Nevertheless, the ongoing cash shortage continues to cast a shadow over the Indian economy. As the Indian government pushes forward with its cashless initiative, it is crucial to address these practical issues and ensure that the transition to a cashless society is seamless and smooth.