Cash shortage hits Bengaluru banks amid election buzz

Bengaluru: Banks across Bengaluru are grappling with an unusual shortage of cash, forcing currency chest managers to reach out to peer banks for additional banknotes as demand outstrips supply.

Most currency chests have been able to meet only a part of the cash requirements raised by branches over the past few weeks, senior executives from state-run and non-state banks told ET. Internal advisories circulated by a large state-run bank, seen by ET, suggest growing stress amid tightening currency availability.

Withdrawals from current and overdraft accounts are outpacing remittances, said bankers. Businesses and contractors in sectors such as construction, property development and government-linked civic projects-where wage payments are often made in cash-are withdrawing large sums. While such withdrawals are permitted, tax deducted at source applies beyond prescribed thresholds.


Large cash withdrawals typically circulate back into the banking system within days, but bankers said that cycle appeared to have slowed in recent weeks.

A possible reason could be upcoming polls, said people who have handled election work before. As civic polls in Bengaluru and assembly elections in several states including neighbouring Kerala and Tamil Nadu are due in the next few months, political parties and potential candidates may have started mobilising cash for poll-related expenses, they said.

ATMs get priority

Executives said ₹500 denomination notes-the backbone of everyday transactions-have become particularly scarce. Banks are prioritising ATM replenishment to ensure retail customers don't suffer, even as branch-level cash availability remains strained.

Bankers said they have flagged the subject to their higher-ups and that the banks have sought help from the Reserve Bank of India to tide over the crisis.

The RBI did not respond to ET's email seeking comment.

MS Mahabaleshwara, former CEO of Karnataka Bank, said a sustained rise in withdrawals typically serves as an early warning signal. The RBI closely monitors currency availability and has adequate policy tools to address imbalances when required, he said.

A senior banker noted that fresh currency supply alone may not resolve shortages if cash is being systematically withdrawn and held outside the banking system.

Banks have internally advised branches to encourage customers to do more digital transactions. In one advisory, a large state-run bank attributed part of the strain to the broader policy push towards digital transactions while urging customer cooperation during what it described as a temporary disruption.

Elections Coming

There is speculation that the heightened cash demand may be linked to pre-election activity.

"It is no secret that money plays a significant role in elections," said PN Sreenivasachary, former Karnataka election commissioner.

As movement of cash becomes more difficult after the election schedule is announced, political parties and prospective candidates typically begin mobilising funds months in advance, he added.

Elections in five Bengaluru city corporations are expected before June 30, the deadline set by the Supreme Court. The city will be witnessing civic polls after a gap of 11 years. Assembly polls are due over the next three months in Assam, Kerala, Puducherry, Tamil Nadu and West Bengal.