Why are ATMs in India suddenly running dry again?
Demonetisation era is long gone but one issue of that period has resurfaced -- ATMs are once again running dry in parts of India.
Latest data from RBI show that currency-in-circulation (CIC) has reached over Rs 13.36 lakh crore as on April 07,2017 which is Rs 4.61 lakh crore less than that of the total currency in circulation before demonetisation.
CIC has significantly improved from Rs 9.13 lakh crore in December 2016 (end of demonetisation period) to Rs 13.10 lakh crore in March. During the month of Janaury 2017, CIC stood at Rs 9.92 lakh crore and in February 2017 it was at Rs 11.39 lakh crore.
From November 08, 2016 (start of demonetisation period), CIC declined to Rs 9.87 lakh crore in December 2016.
Why then have ATMs started to run out of cash?
As per LocalCircles survey, from April 13 - April 16, nearly 46% of Indian citizens could not find ATMs dispensing cash. In the first week of April 2017, about 36% of citizen has reported the similar problem.
53% said ATMs were dispensing cash but has to wait more than 30 minutes. Such percentage is a decline compared to April 01 – 08, where 60% were happy with ATMs dispensing cash.
4% said they had to wait between 30 minutes – four hours to get cash from April 01 – 16, 2017.
Here's how money floats from note press to ATMs.
There are four thousand currency chests with 2.2 lakh ATMs in India.
Among 11 cities across India, Hyderabad was worst hit with ATM outages at 83%, followed by Pune at 69%, Faridabad at 63%, Kolkata at 50%, Banglore at 49%, Mumbai at 44% and Gurgaon at 42%.
The survey said, "People have been withdrawing cash in bulk from the counters and the banks have been forced to maintain high liquidity. This has resulted in the maintenance of ATMs taking a back seat and them not getting replenished with cash frequently. People have also been with drawing large amounts from the ATMs due to some banks levying a transaction fee after 4 withdrawals from ATMs, leading to the ATM going out of cash quite quickly."
On the other hand, Vivek Kaul, author of Easy Money trilogy, in his blog post said, “The slow growth of currency in circulation wasn’t enough to satiate the demand of the public and to a large extent explains why ATMs have generally been running dry. And this to some extent explains the increase in digital transactions.”
Niti Aayog on April 14, 2017 said, "The volume of all digital transactions has increased by about 23 times with 63,80,000 digital transactions for a value of Rs 2,425 crore in March 2017 compared to 2,80,000 digital transactions worth Rs.101 crore till November 2016.”
Interestingly, RBI's data shows some other movement in digital transactions.
There are ten major electronic payment system and 7 out of those ten digital payment modes saw decline between January – February.
Total digital transactions in India stood at 893.9 million with value of Rs 149,58,910 crore in March, followed by 763 million volumes with Rs 92,59,450 crore in February 2017 and 870.4 million volumes with Rs 97,01,140 crore in January.
After seeing little rise in March, transactions in digital mode like Immediate Payment Service (IMPS), Debit card and credit usage at Point of Sale and mobile banking has slowed down in first two weeks of April 2017.
At POS, cumulatively there were 125.4 million transaction made between April 01 – 18, 2017, totaling up to Rs 22,640 crore. From March 01 – 18, 2017, this mode held 132.8 million transaction with Rs 23,950 crore.
Between April 1-18, mobile banking reached 34.1 million transactions totaling Rs 56,650 crore. This is lower than 37.3 million transactions with Rs 91,180 crore recorded between March 01 - March 18, 2017.
IMPS payment mode saw 36.9 million transactions totaling Rs 31,180 crore from April 01 – April 16, 2017, this growth is slower compared to first two weeks of March 2017 where transaction volume was at 41.3 million at Rs 34,140 crore.
Explaining the March month jump, Ravi B Goyal, Chairman and Managing Director, AGS Transact Technologies Limited said, “Digital transaction numbers having increased in the days’ post demonetisation showed slight decline across most channels in January and February. An upward trend was also noticed in March again part due to year-end investments and tax payments by individuals. We believe that Internet accessibility/ digital divide might be holding back digital transactions rather than behavioral issues.”
Goyal further said, "New age payments options like virtual cards, sound waves and one-touch pay technology are also being explored to improve user convenience and encourage more people to switch from traditional style of transactions. However, a strong banking know-how and robust infrastructure will be critical for long term sustenance. "