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Cash crunch due to less income velocity, more withdrawals: SBI
Mumbai, April 18 (IANS) Describing recent reports of cash shortage in the country as “logic defying”, state-run State Bank of India (SBI) on Wednesday said the possible reasons could be the declining income velocity of currency with the public in 2017-18 coupled with increased ATM withdrawals during the second half of last fiscal.
An SBI Ecowrap report authored by Chief Economist Soumya Kanti Ghosh said that currency in circulation in the economy had reached Rs 18.29 lakh crore by March 2018, surpassing its pre-demonetisation level of Rs 17.98 lakh crore.
Blaming “unusual demand” for currency shortages in some areas, the government on Tuesday announced it has decided to increase printing of Rs 500 notes by five times.
“The recent reports of cash shortage appear intriguing and defy logic. However, there are a couple of trends that beg explanation and may be the possible reasons for such apparent trend,” the SBI report said.
“First, income velocity (of currency with public) has been on a declining trend in FY18, particularly in the second half. This indicates possibly currency of the higher denomination Rs 2,000 is not getting adequately circulated in the economy.
“Our internal estimates suggest that in states like Bihar, Gujarat and the southern states, the income velocity is far less than the national average,” Ghosh said.
Juxtaposing this trend with the ATM withdrawals, he said that during the second half 2017-18, ATM withdrawals increased by 12.2 per cent, as compared to the first half.
“This growth was much higher compared to FY16 or FY15 and even the 5-year average (8.2 per cent during FY12 to FY16),” the report said.
“We believe, there has been a forced shift in currency composition with more of smaller denomination notes in circulation now.”
Ecowrap pointed out there was no Rs 200 denomination note during remonetisation in 2017.
“However in FY18, the pace of circulating Rs 200 denomination increased manifold, as has happened with with notes of smaller denomination.
“This may have altered the demand for smaller denomination notes in a larger way to possibly substitute (more transactions) for the currency of larger denominations which are getting less. As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available,” it said.
“Additionally, heightened economic activity beginning Q4 of FY18 has meant that the demand for working capital cycle has changed for the better resulting in more usage of cash for transactional purposes. This may have also prompted more withdrawals,” it added.
Regarding the availability of cash with the country’s largest lender, SBI Chief Operating Officer Neeraj Vyas said in a statement that the situation had improved over the last 24 hours.
“Efforts are being made on a continuous basis to improve the cash availability further in a few geographies. Overall issue of less cash should come to normalcy within soonest possible time,” he said.
–IANS
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Dr. Abhishek Verma Dedicates a Shelter in Memory of His Mother, Veena Verma, at KGMU; Inaugurated by Daughter Nicolle Verma
World-renowned business tycoon Dr. Abhishek Verma has supported Foodman Vishal Singh’s Hunger-Free World mission. In memory of his mother, Late Veena Verma, who was a 3 term Rajya Sabha MP.
Dr. Verma dedicated a state-of-the-art free permanent shelter for the attendants of patients at KGMU Medical University, Lucknow, under the aegis of Vijay Shree Foundation. His daughter, Nicolle Verma, inaugurated the shelter.
During the event, Foodman Vishal Singh honored Nicolle Verma by presenting her with a memento. Mrs. Nidhi Sharma and Avantika Yadav, associated with the organization, welcomed her with garlands. Following this, Nicolle Verma distributed essential items to the attendants and also handed out fruits. She became emotional remembering her grandmother on her birth anniversary.
On this occasion, she also inaugurated the “Veena Verma Sevalaya” in memory of her grandmother, Veena Verma, to serve the attendants. She expressed, “I feel proud that my family is engaged in nation-building as well as social service. Today, in collaboration with Vijay Shree Foundation founder Foodman Vishal Singh Ji, I feel immensely proud to dedicate this shelter for the poor, helpless, and needy attendants of patients battling serious illnesses like cancer. I am honored to be associated with the Hunger-Free World Mission for humanity.”
Inspired by the continuous humanitarian service provided by Vijay Shree Foundation over the past 17 years, Nicolle Verma donated 10 lakh rupees to support the cause. The purpose of this donation is to ensure that services continue for the needy attendants of patients suffering from severe illnesses in hospitals, as facilitated by Foodman Vishal Singh.
It is noteworthy that Dr. Abhishek Verma’s family has a legacy of public and philanthropic service. They are helping millions to carry forward the values and service work of their parents. On the occasion of his mother’s birth anniversary, Dr. Abhishek Verma dedicated this state-of-the-art permanent shelter at Lucknow Medical College to serve the attendants of patients through the Vijay Shree Foundation.
Supporting Foodman Vishal Singh’s Hunger-Free World mission, Dr. Abhishek Verma assured that he would continually support keeping this flame of humanity alive. He also promised to assist in providing medicines to the helpless patients.
Continuing her grandmother’s legacy of service, Nicolle Verma personally served food to the needy patients and attendants. She said, “It is our good fortune to have received the joy of doing this noble work today through Foodman Vishal Singh. I have taken another step forward in carrying my family’s values and cooperation by joining hands with the Vijay Shree Foundation. My father taught me to serve and help the needy, and I feel happy when I bring a smile to someone’s face.”
On the birth anniversary of the late Veena Verma, the event organizer, Vijay Shree Foundation founder Foodman Vishal Singh, said, “We feel proud and happy that Dr. Abhishek Verma, a globally renowned business tycoon, has extended his support to uplift our country from the hunger index. Today, on his mother’s birth anniversary, he inaugurated a state-of-the-art permanent shelter at Lucknow Medical College, which will always be helpful for the needy attendants of patients. It is a pleasure for me and the organization to receive the affection of Mr. Verma.”
The event was attended by General Manager Verma Family Office Hemant Garg, Sonu Rajput, and the organization’s volunteers, including Sandeep Singh, Parmeshwar Ji, Prashant Rao Gautam, Balram Singh, Ramesh Chaudhary, Suman, Jeetu, Anil, Suraj, Vinay, Manish Bhadauria, Manas Mehrotra, Vivek, Apurv, Happy, and others.