Cash inflow to J&K

Halting of high value currency notes supply by RBI to J&K has already created panic among the people.The reported unofficial restrictions on cash and currency notes of higher denomination inflow into Jammu and Kashmir during the past one month is likely to have an adverse impact on the business and economy of the state. Though the Reserve Bank of India and some Public Sector Banks have refuted the reports and maintained that cash currency flow to J&K is being monitored closely and there is no shortage, the business dealings in the market are already facing the heat. The question as to who have stopped circulation of higher value currency notes into J&K and why such kneejerk decisions are being taken, there is no satisfactory answer from the concerned authorities.

The J&K finance minister Dr Haseeb Drabu also denying knowledge of any such development and assuring the people that he would take up the issue with the concerned authorities does not solve the problem. Already, the demonetisation of Rs 1000 and Rs 500 currency notes last year and Goods and Services Tax (GST) implementation have played havoc with the economy of the country and J&K is no exception, which has been witnessing an upward trend after disturbances for over six months after Burhan Wani’s killing in July last year.

The argument that this has been done keeping in view the security considerations that high value currency notes are used by the militants does not hold good because of the fact that even at the height of militancy in J&K in 1990s, no such drastic step was taken by the centre or RBI. Another argument that Automated Teller Machines (ATMs) being targeted by militants for looting the cash is also not justified if such incidents across the country are taken into consideration. Another argument of the union finance minister Arun Jaitely that stone-pelting in Kashmir has been impacted due to withdrawal of high value currency notes also does not justify the ends. Neither the stone-pelting incidents have decreased nor the number of youth joining militancy has come down since last year. In fact, ATMs and cash vans are targeted by the militants and other needy people only out of frustration when cash and currency flow into the markets and banks is short.

Apart from the routine business and economy being hit by shortage of cash and currency inflow, the banks have started feeling the heat as they have been unable to service the 2400 ATMs across the state. In the absence of high value currency notes of Rs 2000 and Rs 500, the banks including the government owned J&K Bank have to fill the cash chests of ATMs half a dozen times during the day because high cash withdrawals by the customers. The cash withdrawals from the ATMs have come down to Rs 70 crore from s 90 crore per day and majority of the ATMs are cash starved in rural and small towns of the state. Moreover, in the absence of dependable Internet connectivity, majority of the people in J&K find it extremely difficult to conduct online banking transactions and are dependent on cash circulation for routine business. Unfortunately, the frequency of suspension of Internet services, mobile and SMS by the government in J&K is perhaps the highest in the country due to disturbances every now and then. The slogan of ‘Digital India’ for encouraging online banking transactions is a flop show in places like J&K. The situation in the post-demonetisation of high value currency notes in J&K was not alarming as majority people did not have phased out currency notes in their possession because high dependence on banking transactions.

J&K having only one percent of India’s population accounted for 1.50 crore bank accounts out of a total of 25.50 crore bank accounts in the country, there was no serious problem in exchanging old notes with the new ones. J&K was perhaps the only exception which did not witness the long queues of customers outside the banks for replacement of invalid currency notes. But if the cash shortage continues to linger on, people will be frustrated and lose their trust and confidence in the banking network, on which they have been relying for safe keeping of their hard-earned money. The customers have been worried lot after central government’ proposal to use depositors’ money by the banks if they fear going bust due to high Non-Performing Assets (NPAs). The clarifications from the central ministers that such laws are being enacted for safety of the bank depositors are not going to have any impact in restoring the confidence of the people in banking and financial institutions.