MUMBAI: Having speeded up printing presses to refill banks’ empty ATMs in some parts of the country, the Reserve Bank of India released data on Wednesday showing that people were still hoarding cash as withdrawals outpaced spending.

Typically, economists say, cash withdrawn from banks takes a few months to re-enter circulation as people spend. Because of these lags, the weekly reserve money figures don’t tell exactly how much people have hoarded, but the data does give a strong sense of the trend.

The incremental increase in currency in circulation, a component of the data, shows how much people are withdrawing every week and the amount of new money the RBI is supplying to banks.

During the week to April 20, they took 163.4 billion rupees ($2.44bn) out of the banks, bringing the total for the first three weeks of the month to 595.2bn rupees, the RBI data showed. In the previous three weeks withdrawals totaled 164.7bn rupees.

Currency withdrawals in the January-March quarter stood at 1.4 trillion rupees, about 27 percent more than in same quarter of 2016.

Overall, the currency in circulation stood at 18.9tr rupees as of April 20, 18.9 per cent up since the beginning of last October when withdrawals began to gather pace.

Alarm bells only rang this month when cash dispensers began running dry in several states, including Andhra Pradesh, Telenghana, Karnataka, Madhya Pradesh and Bihar.

Neither the central bank nor commercial bankers appear to have a clear idea about this sudden pick up in withdrawals.

The RBI did not elaborate on Wednesday’s reserve money data but in a circular last week it had said the shortage could be due to a delay in getting cash to the ATMs and that it has ramped up note printing.

But there is concern that Modi’s audacious decision to take high value banknotes out of circulation in late 2016 may be suffering a blowback, as Indians revert to old habits of keeping cash out of the banks, and out of sight of the taxman.

Published in Dawn, April 26th, 2018