2019-08-11_Business_Today

CURRENCY

Inadequate

Currency in

Circulation...

There is a likely deficit

of `1.45 lakh crore in the

system

...But Spurt In Currency

With Public 

There has been an abnormal

rise in currency with public

in the last two years

stage). Instead, they prefer to lend to a project once the

building is half finished or where some sale has taken

place. “These negative sentiments are also contributing

to delays in disbursement,” says Mehta.

The credit squeeze has hit everyone, says Niranjan

Hiranandani, Co-founder and Managing Director of

Mumbai-based real estate major, Hiranandani Group;

Senior Vice-president of industry association Asso-

cham; and National President, National Real Estate

Development Council. “There is simply no money avail-

able even for good businesses to expand,” he says.

The other sector that the liquidity squeeze has hit is

automobiles, which was already reeling under a slow-

down. The auto industry used to generate a lot of sales

via the financing route. NBFCs, in fact, enjoy a 30 per

cent market share in this with a lending book of `1.22

lakh crore. “NBFCs fund our growth as new custom-

ers who are not serviced by the banking industry come

through them. They bring in 15-20 per cent incremen-

tal sales. That has all gone now,” says Ashish Kale, Presi-

dent of Federation of Automobile Dealers Association

(FADA), and Managing Director of Nagpur-based Pro-

vincial Automobile.

Most dealers borrow from banks for working capital

and inventory management but a slowdown in the auto

sector means dealers are strugglling to liquidate stocks

and loan defaults have gone up. A record 271 deal-

ers have shut shop over the past 18 months, which has

made bankers more cautious. They have now resorted

to seeking high collateral for inventory funding, some-

times to up to 100 per cent of the loan amount.

The gems & jewellery sector is also gasping for

funds. The squeeze started with the twin shocks of de-

monetisation and GST, followed by the Nirav Modi and

Mehul Choksi frauds in the banking sector coming to

May-19

-38,736

June-19

41,877

Nov-18

-83,482

Feb-19

-71,365

Source: RBI, CARE Ratings

Currency In Circulation

(` lakh crore)

Mar-19
21.37 Mar-18
18.29

Mar-17

13.35

Mar-16

16.63

Mar-15

14.48

Mar-14

13.01

Mar-13

11.91

Mar-12

10.68

Mar-11

9.50

Money With Public (` lakh cr)

Change (` lakh cr)

Currency with public

after deducting cash

with banks from total

currency in circulation

Source: RBI

M

ar

-^1
4

Dec-18

-1,01,027

Jan-19

-36,992

July-19

1,24,710

12

.^4

8

1.

04

13

.^8

7

1.

39

15

.^9

8

2.

11

-^3
.^3

3

17

.^5

9

4.

96

2.

93

20

.^5

2

12

.^6

4

M

ar

-^15
M

ar

-^1
6

M

ar

-^1
7

M

ar

-^1
8

M

ar

-^1
9

April-19

-72,014

August 11 I 2019 I BUSINESS TODAY I 31

(Till July 12)