SBI: Cash crunch artificial, more money in circulation than before DeMo: Rajnish Kumar, SBI–18.04.2018

Cash crunch situation overrated, dispensing Rs 33K cr cash daily: SBI Chairman

In an interview with ET NowRajnish Kumar, Chairman, SBINSE -0.34 %, says the bank had anticipated greater demand in Punjab, Madhya Pradesh and UP and taken steps. Money has to be diverted in Andhra and Telengana which are facing shortage.

Edited excerpts:

Can you tell us about the cash crunch in certain states?

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One, this is being overstated. I will just give you some statistics. Pre-demonetisation, the currency in the country was 17.98 lakh crore. In March 18, the currency reached 18.29 lakh crore. Our ATM reliability is 88% which is also the normal. It may so happen that sometimes because of the technical reasons, an ATM may be out and the vendor takes time to reach that machine and set it right. But to say there is a shortage of currency is not the right statement to make. The currency has increased, in fact, in the last one year we have received five lakh crores from RBI in this financial year alone.

What happens in states is as this is the procurement season, the requirement for cash goes up. In the first week, because of salary payments, cash requirement goes up. Every day in the 55,000 State Bank ATMs we are dispensing about Rs 3000 crore cash. My appeal to you, the channels and the general public would be that the cash that they are withdrawing, needs to come back to the banking system.

There is no need that you keep cash with you. Today when the digital economy has grown in a big way and the number of transactions have gone up manifold, let us not try to create a situation where we make statements about universal shortage of cash or there is huge problem. All our channel managers and people who are responsible for the cash management, are very much on the ball and we have enhanced the monitoring also. There is an attempt to create some sort of a psychology that there is a cash shortage. This is not the right thing to do.

While I do understand your point that how panic should not be created and there is enough cash in the system, you are also saying that your ATMs are running at 88% capacity. Are you saying that it is not true that all states barring Rajasthan, Maharashtra and Kerala are experiencing acute cash crunch? While you or the RBI or the government cannot do anything, there is a hoarding of the Rs 2000 currency notes, these cassettes in the ATM machines are not running empty, that they are not blank and haven’t you at SBI stopped levying bulk deposit charge just to encourage deposits from consumers?

No. I am telling this again it has nothing to do with the cash shortage, but when you are in a competitive scenario and you find yourself in a situation where your charges are higher or other banks are not charging,t hen these decisions are taken in the normal course of business.

Somehow because of the timing, they get linked to what you are saying. These charges should never be linked to this thing and time to time, we run campaigns. Right now, we are running a CASA campaign, we want to increase CASA. And our CASA in fact has gone up almost 100 bps. These are all the business decisions and they should not be linked to the situation.

As I see, there are certain states where because of procurement, the requirement for cash has gone up. Within SBI also, in certain states, there may be more cash but we have never felt the need to send cash to other states because our situation is comfortable in most states.

But since the demand for cash has gone up on account of the procurement season, we are diverting cash from certain currency chests where there is a surplus and inter branch movement is also happening in case there is any imbalance where some banks have more currency and SBI currency chest has less currency.

That is what keeps on happening all the time. It is not that this is something new. Managing currency is our primary responsibility. We are aware of this responsibility and we are fulfilling this responsibility.

Which are the states where you are seeing this temporary shortage, this sudden and unusual increase whether due to hoarding or whatever the case may be? Have you already started diverting cash? Was there any request with the Reserve Bank to maybe print more money or to change the denomination that is out in circulation?

That is also our job because we are in the front and RBI is at the back. So what is the demand from the public for which denomination, what is happening, all that gets reported and goes in for the planning when you are printing cash.

You asked specifically about which state. Let me tell you that for the procurement season, Punjab, Madhya Pradesh or UP are the states where we had anticipated that the requirement for currency will go up. The states where more currency needs to be supplied are Andhra and Telangana. We have some surplus. For security reasons, I cannot disclose from where we are diverting but there are certain states where we have some surplus cash which is more than what they need and cash will be sent to these states which I have mentioned.

What exactly you think now really needs to be done, you have spoken about the need for more currency supply, particularly in areas of Andhra and Telangana but this is not the first time that we have seen a situation like this occurring. Today it has happened, prior to Akshya Tritya as well. What needs to be done to ensure that we do not see a repeat of this situation?

If I can request your channel and all channels to tell the public that they should not worry about the currency that is the first thing we need to do. Sometimes it is the psychology which matters because if before demonetisation, the currency with the public and in the system was 17.8 lakh crore, it has gone up to 18.28 lakh crore. So where is the shortage? The statistics itself speaks about that there is enough cash in the system. And there are some imbalances between geographies as I said that we are taking care of.

Apart from the diversions and using the existing currency, the requirement or the indent with the Reserve Bank of India keeping in view the requirement for the procurement season. In the first week, the requirement always goes up; on the third and fourth week, the requirement goes down.

Based on that what denomination and what locations, what currency chest that we are in regular touch with Reserve Bank of India and I am sure that they are taking all steps to augment the situation and if there are any imbalances to address that imbalance.

via SBI: Cash crunch artificial, more money in circulation than before DeMo: Rajnish Kumar, SBI

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