The NDA-government and the Reserve Bank of India (RBI) appear to have suddenly woken up from their deep slumber after the severe cash crunch has adversely affected the operations of the Automated Teller Machines (ATMs) across the country during the past one week. This appears to be another cash crunch in the markets nearly after 18 months after the centre’s decision to scrap high value currency notes of Rs 1000 and Rs 500, which accounted for more than 86 percent of currency in circulation at that time. The cash crunch has already hit the businesses in different parts of the country in an adverse manner because cash continues to be the king in sale and purchase of majority of the goods for transactions. The hue and cry in the markets has been severe in about half a dozen states in the country, where the business and transactions have been hit and resulted in almost no trade of some of the goods and commodities in the market. The central government started acting belatedly last Tuesday in response to reports of cash shortages from states including Telangana, Andhra Pradesh, Karnataka and Madhya Pradesh over a fortnight back. Terming the shortage a manifestation of an ‘unusual spurt in currency demand’ over three months, the Union Finance Ministry has emphasised that the first 13 days of April recorded an increase in currency supply of Rs 45,000 crore. Yet, thousands of ATMs are either not functioning or not dispensing adequate cash as banks are reluctant to divert cash to them at the cost of customers visiting branches for withdrawals. The ministry has asserted that over Rs 1.75 lakh crore of cash lies in reserves, which may now be deployed to meet the demand of the bank customers. On its part, the RBI has claimed there is enough cash in its vaults, but it has ramped up the printing of all notes. At the same time, it blamed the shortages on logistical issues of replenishing ATMs and said it is moving more cash to regions that witnessed high cash withdrawals. But question arises why the centre and the RBI did not act when the states warned about the cash shortages about two months in these half a dozen states. In one case, the chief minister of Andhra Pradesh appeared to have written to the centre on this issue in the month February itself. The centre or the RBI refused to act on the first complaints. Apart from the explanations given by the RBI that there have been huge cash withdrawals from the ATMs and bank branches over the past one fortnight, there are other factors that have affected the cash supply chain in the market. There are different theories on how forthcoming elections, starting with Karnataka and possibly ending with the Lok Sabha polls in 2019, have prompted a big cash management exercise among political parties. Part of the retail love for cash is also being attributed to depositors’ fears about the impending Financial Resolution and Deposit Insurance Bill that makes it possible to deploy investor savings to bail out stressed banks and financial institutions. There could be some truth in these explanations, but the genesis of the current cash crisis is firmly rooted in the lack of system-wide thinking that went into the centre’s sudden note ban gambit. The central government may have chosen to go for Rs 2,000 currency notes ill-conceived post-demonetisation to remonetise the economy faster, but with lower denomination notes taking longer to flow freely, circulation wasn’t efficient and the big note has become a preferred mode for hoarding capital. That a plan to re-introduce Rs 1,000 notes was later junked didn’t help; nor did the difference in the sizes of the new notes. As the RBI noted last Tuesday, recalibration of ATMs is still under way for the Rs 200 currency notes, which are still largely being circulated in the market through the bank branches. Demonetisation may have been aimed at weeding out black money, but perpetuating dependency on the Rs 2,000 currency note ignores an age-old heuristic for currency management that every denomination should be 2 to 2.5 times its preceding denomination. The current cash crunch shows how the consequences of the overnight demonetisation of November 8-9, 2016 continue to haunt the common masses and hit the markets and economy in the country.