Banks Want RBI To Print More Rs 100 Notes Otherwise There Could Be Another Cash Crunch

Bankers fear the prevailing cash crunch may deepen with unsoiled Rs 100 denomination notes ¡°becoming scarce¡± too. Just like Rs 200 and Rs 2,000 notes, the Rs 100 denomination notes ¡ª especially the ones that can fit into ATM cassettes ¡ª are in short supply too, the bankers said. ¡°This is happening as many of the available Rs 100 notes are soiled and unfit to be placed in the ATMs. Some of them even date back to the year 2005,¡± they added.

Reuters

The bankers urged the Reserve Bank of India (RBI) to address the issue urgently. ¡°The RBI should introduce new Rs 100 denomination notes aggressively, otherwise there will be a tremendous pressure on the Rs 500 denomination notes in days ahead,¡± a currency manager of a public sector bank said.

Soon after demonetisation, the RBI did pump in Rs 100 denomination notes in huge quantities. As against an indent of 5,500 million pieces in 2016-17 (demonetisation year), the RBI supplied 5,738 million pieces of Rs 100 notes, RBI data shows. The bankers, however, said this was not sufficient because Rs 100 acted as a crucial change currency for the Rs 2,000 denomination notes (when the new Rs 500 notes were not easily available).

In the previous financial year (2015-16), the RBI said, it had supplied 440 million pieces less than the indent. Indent is the quantity of notes that banks ask for from the RBI. The data for 2017-18 will be made available in August, when the RBI publishes its annual report.

Reuters

Also, currency managers said since a lot of soiled notes were allowed to be used to tide over the demonetisation period, these notes still form a part of the system.

¡°These notes are so bad that they are becoming a challenge to handle, leave alone putting them in the ATM slots,¡± said a top manager of a public sector bank.

The RBI data also supports this observation. Compared to the previous two years, the RBI disposal of soiled banknotes, particularly of Rs 100 denomination, almost halved in FY2016-17.

In FY2016-17, the RBI managed to dispose of just 2,586 million pieces of Rs 100 notes against a little over 5,100 pieces in the previous two financial years. As a result, the total Rs 100 bank notes in circulation increased sharply to 19.3% of overall currency notes as against about 10% earlier ¡ª bulk of which were additions due to soiled notes.

Reuters

The bank managers also said they have an abundance of low-denomination notes in branches due to the same issue.

Sure enough, the RBI data shows that it managed to dispose of just 4,898 million pieces of notes valued at Rs 50 or below in FY2016-17 against 7,774 million pieces in FY2015-16 and 6,454 million pieces, a year ago. The circulation of these notes increased to 7.3% of overall notes in year ended March 2017 from 4%, a year ago.