New Delhi: Analysts have cited multiple reasons for the sudden cash crisis - from the impending elections and the launch of the GST to a fear psychosis among people about sudden changes in government policy post demonetisation.
"A fear psychosis among large swathes of the Indian population seems to have emerged post demonetisation about possible policy changes leading to hoarding of currency notes ... the currency easiest to hoard is the Rs 2000 and Rs 500 notes," said Biswajit Dhar of the Jawaharlal Nehru University.
Analysts say the Financial Resolution and Deposit Insurance Bill that proposes the use of deposits to bail out failed banks has further spooked consumer sentiments against traditional savings with banks and post offices. "The pattern of savings seems to have changed with cash again becoming one of the favoured medium," Dhar said.
North Block officials say the data of deposits with banks suggest up to 60 per cent of Rs 2,000 notes being hoarded by the public and are not coming back to banks.
RBI data show currency with the public appreciated 10.8 per cent year-on-year in April 2015 and by 15.5 per cent in April 2016, before slumping 15.5 per cent in post demonetisation in April 2017. Currency with the public shot up an astounding 39.2 per cent year-on-year in April 2018.
Analysts also pointed out that key elections usually raised the demand for cash. "Elections are usually cash guzzlers," said Amit Banerjee, a merchant banker, adding "with time elections have become more and more sophisticated and costly and we see more money being taken out of banking system to feed this money guzzler".
The Election Commission appointed static surveillance teams seized some Rs 4.17 crore in cash till April 10 but this figure shot up to Rs 8.75 crore within one single day after the seizure of Rs. 4.58 crore on April 11.
The inclusion of a wide range of services in the new GST and taxation at a high rate are also believed to have forced small service providers to move to a cash economy against the acceptance of other financial instruments.
