Told You So: Andhra, Telangana Junk Centre's Cash Crunch Logic

Hyderabad: Calling the centre's announcement that cash crunch was "sudden and temporary" a bluff, the state governments of Andhra Pradesh and Telangana say they had flagged their concerns to the union government and the Reserve Bank of India (RBI) well in advance.

On February 14, Andhra Pradesh Chief Minister N Chandrababu Naidu wrote to Finance Minister Arun Jaitley, seeking that the RBI provide Rs 5,000 crore to the state that "is facing a serious shortage of higher/lower denomination currency notes".

"Majority of the bank branches are running out of cash every day. The currency crisis will become very serious in the coming days when the state government will have to make salary and pension payments on the 1st of March, 2018," wrote Mr Naidu.

Farmers are unable to withdraw the money paid to them against procurement of food grains, the letter said, adding that the state needed Rs 450 crore to pay pensioners and Rs 2,500 crore towards monthly salary payments.

On Tuesday, Mr Jaitley had admitted to a "temporary" shortage of currency that he said was caused by "sudden and unusual increase" in some areas. 

Have reviewed the currency situation in the country. Over all there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by 'sudden and unusual increase' in some areas is being tackled quickly.

- Arun Jaitley (@arunjaitley) April 17, 2018

That argument was countered by Telangana minister KT Rama Rao who claimed that the shortage of cash was "neither sudden nor temporary".

"I have been hearing complaints for over three months repeatedly in Hyderabad. Please have the RBI and finance ministry team dig deeper and not brush away an issue that is eroding people's confidence in banking system," said Mr Rao.

On March 9, the Telangana chief secretary wrote to the RBI governor, highlighting the cash crisis in the state and requesting supply of Rs 6,000 crore for banks in the state.

"The bankers in the State have informed as of date they are unable to meet the cash withdrawal requirements of customers and many of their ATMs have no cash. Shortage of currency notes is also seriously affecting the citizens," wrote Chief Secretary SK Joshi.

Top officials say barely 30 to 40 per cent of ATMs in both the states have money and that urban areas are facing more cash crunch than rural areas.

Sources in the finance ministry say the banking secretary has held a review meeting and is in touch with the RBI to ensure faster movement of cash to states facing a currency crunch.

"I believe 80 per cent of the ATMs in the country have cash. Some people have a habit of misleading the country to build their own image," said junior finance minister Shiv Pratap Shukla.