Banks see spurt in cash withdrawals

Chandigarh:Banks in the northern region are grappling with currency shortage due to panic withdrawals from customers. According to the bankers, there has been a spurt in cash withdrawals by at least 10-20% in the past one month as compared to pre-demonetisation period.

According to insiders, there is a sense of fear among the deposit holders pertaining to bail-in clause in the Financial Resolution and Deposit Insurance (FRDI) Bill and possible cash shortage in ATMs in future and sudden spurt in frauds related to debit and credit cards. In such a scenario, banks are opting for internal adjustment of cash reserves so that the public does not face inconvenience.

The Financial Resolution and Deposit Insurance (FRDI) Bill was pitched by the Lok Sabha in August, 2017 with the sole intention of protecting financial institutions from going bust and bringing in orderly regime in financial firms.

According to the bankers, many customers apprehend the fear of losing their money in case of implementation of clause 52, which states that it may come to use depositors’ money (bail-in) as a resolution mechanism for banks that run into financial trouble. This means that the corporation has been vested with the power to liquidate depositors’ money in case of bankruptcy. This proposal has led to anxiety among depositors.

“Despite assurance by Union Finance Minister Arun Jaitley that the Bill aims to protect the money of all depositors in state-run banks and there is no need to create any fear psychosis, the depositors have certain apprehensions regarding the Bill and they are withdrawing money,” said a senior banker.

Secondly, the bankers said last month many of the states faced cash crunch in ATMs. This has also brought a sense of fear among the region’s account holders. As a result, they are withdrawing more money from their accounts against their requirements to keep as a backup in case of any shortage,” said a banker on condition of anonymity.

Thirdly, the sudden spurt in credit and debit card frauds has compelled people to rely on cash. So instead of digital transactions, they are relying on cash even for big transactions.