Govt, RBI admit cash crunch: Know reasons behind drying up of ATMs from a data cruncher

On Wednesday, a Twitter thread by data cruncher from Kerala, James Wilson, highlighted various reasons behind the cash crunch.

New Delhi, April 19: On Tuesday, media reports stated that the country has been hit hard by an "unusual" cash crunch as ATMs failed to dispense money in various cities and towns. The cash crunch continued on Wednesday too despite the government's assurances that the situation is "improving". However, there is little clarity about the reasons behind ATMs drying up leading to various speculations.

On Tuesday, Union finance minister Arun Jaitley said there was "more than adequate" currency in circulation and the temporary shortage in certain states was being "tackled quickly". "Overall, there is more than the adequate currency in circulation and also available with banks. The temporary shortage caused by the 'sudden and unusual increase' (in demand) in some areas is being tackled quickly," he assured.

The finance minister's assurance did not help much as fear of living without cash in the coming days badly haunted people. In the entire situation, the most troubling part for everyone was that the government did not give any specific reason for the sudden drying up of ATMs.

On Wednesday, a Twitter thread by data cruncher from Kerala, James Wilson, highlighted various reasons behind the cash crunch.

"As Government and RBI now endorsed that there is a #CashCrunch, many theories are floating in the air about the reasons for the same. @scroll_in published 15 theories about why we are facing a cash crunch now. So let me float my own theory and examine some of the theories too!" tweeted Wilson.

"One of the theories is that there is an unprecedented spur in withdrawal of the money from the banks. Also people refuse to deposit money in the banks. Many factors are attributed for this theory; starting from the scary FDRI bill to Chota Modi Scams to Minimum balance looting," Wilson wrote.

Then he examined whether there was an unprecedented withdrawal from the banks in the last couple of months. However, Wilson did not find any such rise in withdrawal based on the Reserve Bank of India (RBI) data.

Wilson in his tweet also examined currency in circulation versus nominal GDP data--the most important factor, which governs how much currency is needed in the system.

He also shared a conspiracy theory behind the cash crunch.

To understand the reasons behind cash crunch, go through the entire Twitter thread well. It is not only full of facts and figures but is written in a simple and lucid manner for a layman.