Cash Crisis: Pain May End Only By January-End; 30 December Deadline Can’t Be Met

R Jagannathan 

The only thing that can be said with certainty is that the cash crisis won’t end by Narendra Modi’s promised 30 December.

It will last at least a month longer, assuming some notes are printed abroad.

Here’s the new math on how soon the currency shortage will end.

We know that a little over Rs 14 lakh crore became illegal tender from the midnight of 8 November. But not all of it needs replacing, since the currency used for storing black wealth or the money held by even ordinary people in reserve for meeting sudden emergencies need to be excluded from immediate requirements. The money anyway would now be parked in banks.

Plus, one needs to factor in the big shift in transactions to digital channels, including cards and e-wallets, that has taken place since 8 November.

Assuming only around Rs 10 lakh crore needs to be fully reissued, this is what the math looks like on how soon this money will be available with banks, and ultimately the people.

Mint reported yesterday (30 November) that some two billion pieces (200 crore pieces) of the new Rs 2,000 note had already been printed before the Reserve Bank of India (RBI) decided to get all printing presses to print the new Rs 500 note.

This means Rs 4 lakh crore has already been printed. Another Rs 1 lakh crore in other denominations, mainly Rs 500 and Rs 100, could also have been printed as on 30 November with multi-shift working.

So, at the start of December, we have a backlog of around Rs 5 lakh crore in currency.

The printing capacity of the four note printing presses, two run by the government and two by the RBI, is around 300 crore pieces a month on three-shift working.

This means if all of them pump out Rs 500 notes, they can print Rs 1.5 lakh crore a month. It will thus take a little over three months to remove the backlog.

This means the cash crisis will abate only by end-February.

But if the government seeks to import some of the cash, the crisis can be ended earlier, say, by January-end.

The only things we can say with certainty is that the cash crisis won’t end by Narendra Modi’s promised 30 December. It will last at least a month longer, assuming some notes are printed abroad.

And don’t forget the logistics, which could take another fortnight to get the money from the presses to your wallet.

The main takeout is this: currency import is needed.