"Ghost" of demonetisation has returned to haunt govt: Chidambaram

Former finance minister P Chidambaram

Former finance minister P Chidambaram on Wednesday said the "ghost" of demonetisation has come back to haunt the government and alleged that the Rs 2,000 notes were printed only to help hoarders.

In the wake of the cash crunch in some parts of the country, he also said there was a possibility that people have lost confidence in the banking system due to the "bank scams" and they were not putting their surplus money into the banks.

"The ghost of demonetisation has come back to haunt the Govt/RBI. Why are ATMs still being re-calibrated even 17 months after demonetisation?

"After demonetising 500 and 1000 rupee notes, Govt printed Rs 2000 notes! Now, Govt is complaining that Rs 2000 notes are being hoarded!! We always knew that Rs 2000 notes were printed only to help hoarders," he said in a series of tweets.

Dismissing the statement of the Reserve Bank of India that there was no shortage of currency in the system as "unsatisfactory", the senior Congress leader said if the RBI has printed and supplied sufficient cash, it must explain why there is a cash shortage.

"I also suspect that RBI seriously miscalculated demand for cash in the post-harvest season. Is it correct that currency in circulation has increased by only 2.75 percent since demonetisation? If so, I maintain that Govt/RBI are not allowing the money supply to grow at the same rate as the nominal GDP," he said.

Chidambaram said he suspected ordinary people were withdrawing cash but not putting back into the banks their surplus cash.

"It is possible that there is some loss of confidence in the banking system, thanks to the bank scams," he said.

He said he supported the digitisation, but the government cannot force the pace of digitisation or arbitrarily reduce the supply of cash.

According to officials, cash position across the country is improving fast with over 80 percent of 2.2 lakh ATMs operating normally today.

An unusual spurt in demand for currency had led to many ATMs and banks running out of cash in Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Telangana and poll-bound Karnataka and some other states yesterday even as the government and the RBI assured the public that there was no currency shortage. 

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