I-T Dept finds excessive withdrawals in Telangana, Karnataka, AP led to cash crunch

The Income Tax Department has zeroed in on the main reason that led to a sudden currency shortage in several states earlier this week. I-T Department sources told India Today that excessive cash withdrawals first started in Telangana and later spread to neighbouring states Karnataka and Andhra Pradesh.
                                                                                                    
But, who made these withdrawals? "Rice millers, contractors and agro-traders made unusually large number of high volume payments without any justification. The department has also found that the large number of high-worth payments were made through cash and other instruments. In fact, 20 odd huge transactions were made in one go," the source told India Today.  

I-T Department is suspecting hoarding of cash to create currency shortage in Karnataka, according to the source. The southern state is scheduled to go to polls in less than a month. The tax authority is questioning the recipients of huge amounts of withdrawn cash. The probe shows payments and withdrawals were way beyond past trends.

Last week, ATMs in Gujarat, Maharashtra, Bihar, Rajasthan, Uttar Pradesh, Madhya Pradesh, Telangana, Karnataka and Aandhra Pradesh had run out of cash. The Finance Ministry in a statement said that the crisis happened to unusual spurt in currency demand in last three months.

On Thursday, it was reported that the situation in many parts of the states have improved with over 80 per cent of ATMs working fine. In a report, the SBI claimed that there was no real currency crisis and what had had happened could be a seasonal phenomenon.

It said: "The decline in ATM withdrawal in the fourth quarter could actually be a seasonal phenomenon apart from the usual reasons floating around like currency shortage. This strongly supports our contention that the current shortage could be superficial rather than real."