Demonetisation effect: Rural India still faces cash shortage

According to RBI data, currency in circulation was Rs 13.12 lakh cr as of March 24

After normalising for a while in the January-March quarter, cash-handling activity has declined by at least 12-15 per cent and is under pressure in April, say cash management companies who blame the situation on a severe cash crunch in the system. Due to this, at least 9-10 per cent automated teller machines (ATMs) in the country remain consistently dry, cash management companies say. 

According to cash-handling companies such as CMS Info Systems and Logicash Solutions, the available cash mainly lies with the bank branches and has not been transferred to ATMs. Also, rural areas are still facing cash shortage. 

For example, average daily volume handled by Logicash in the October-December 2016 period was Rs 300 crore, which rose to Rs 450 crore in the January-March period, for 14,000 ATMs. But this was still lower by 18 per cent when compared to the corresponding period in the previous year when the company used to manage Rs 550 crore daily for 13,000 ATMs.

“Cash management activity has fallen by 12-15 per in April as cash mainly lies with the bank branches in many of the rural areas. There has been shortage of cash in the rural areas but compared to December and January, the situation has improved,” said Vipin Jain, chief executive officer, Logicash.  CMS Info Systems said it transported 17 per cent less cash in the first week of April compared to the first week of March and 7.5 per cent less in the second week of April versus the corresponding period in March. “We see around 9-10 per cent of ATMs remaining consistently dry because customers withdraw a little more than what they actually need because of scarcity of currency notes. Festivals and long weekends in April could also be an influencing factor,” a CMS spokesperson said. 

Before demonetisation, CMS replenished around 30,000 ATMs on a daily basis. But after the note ban, the daily visits dropped to 8,000 ATMs, and by March, the replenishments have normalised to 80-85 per cent of pre-demonetisation levels.The sector operates around 200,000 ATMs across the country and handles about Rs 8,500 crore of cash daily. The percentage of dry ATMs is slightly higher in small towns. But, this was temporary and the situation is likely to improve in the coming days, Logicash said. 

Cash management companies play an important role in the cash cycle. The industry handles more than Rs 10,000 crore of cash per day in the form of ATM cash management, cash delivery and pick-ups, and inter-branch, inter-city bulk cash movements. Cash logistics companies handle more than 160,000 ATMs outsourced for cash management and about 80,000 retail points for doorstep banking. According to latest data of the Reserve Bank of India (RBI), currency in circulation was Rs 13.12 lakh crore as of March 24, up from Rs 9.5 lakh crore in mid-December.

The burgeoning ATM networks of banks is also creating shortage of notes, the cash management companies said, adding the government’s push for a cashless system wasn’t a serious threat to the cash management industry.

“We are into retail cash business which will have no impact. The common man and rural population still need cash for their livelihood. We do not deny the fact that digitalisation is the best mode to transact, but it will definitely need an era to reach the major population in India,” Jain said.