Kenyan banks at pains to offer new currency as shortfall hits
- Sector analysts are wary of risks of demonetization efforts by the State, as was represented in India’s similar move in 2016.
- India’s demonetization had aimed to remove its high valued 500 and 1000 rupee notes as a remedy to netting black money and fakes only for the drastic measure to fail catastrophically.
- Only 0.7 percent of the note sin question left the system as the majority 99 percent was sieved through the State checks to re-emerge back into the system as clean float.
Kenyan banks have re-configured their teller machines to churn out old-series notes.
A senior banking official told Citizen Digital that lenders banks are at pains to work around a limited supply of new currency reserves.
On June 6, CBK confirmed receipt of the first batch of new notes to banks but assurance on circulation has consequently deteriorated.
Media reports at the end of last week first lifted the lid on the prevailing new currency shortage, based on scrutiny into day to day banking transactions and observations from the consumers of financial services.
A follow-up into the matter at the start of the week established the ongoing infrastructure re-adjustments.
This as a considerable number of individual automated teller machines (ATMs) in banking halls remained out of order at the start of the week, an indication into ongoing repairs.
The banking sector has begun to express its disgruntlement with the regulator as lenders face up to hard queries from both the members of public and the press.
“The CBK has thrown the monkey at our door! Central Bank has remained silent even when as the ball of printing new money and its distribution lies on their court,” a banking industry player said on condition of anonymity.
CBK Governor Patrick Njoroge who had from the onset of the demonetization process opened up to regular updates on the undertaking has not issued a statement on the issue.
He turned down questions from journalists during his last public appearance at the Afro-Asia Fintech Festival this week.
The silence of the reserve bank has opened the floodgates to all forms of speculation with the majority of recorded scrutiny pointing to a decisive and deliberate cuts to the circulation of new money.
Sources claim that the CBK might be squeezing out holders of the old series Ksh.1000 notes which are to be removed from circulation by Oct 1, 2019 by denying them new notes until the very end.
The experts however reckon the CBK may be as well be shooting itself on the foot by allowing for the continued flow of the undesired notes in the financial system.
Further, sector analysts are wary of risks of demonetization efforts by the State, as was represented in India’s similar move in 2016.
India’s demonetization had aimed to remove its high valued 500 and 1000 rupee notes as a remedy to netting black money and fakes only for the drastic measure to fail catastrophically.
According to a report released by the Reserve Bank of India (BRI) last year, only 0.7 percent of the note sin question left the system as the majority 99 percent was sieved through the State checks to re-emerge back into the system as clean float.
Moreover, India’s government tinkered with the rules to the changeover denying many of its citizens the opportunity to conform to the new legal tender to end in a liquidity chaos manifested in hyperinflation, the loss of over 1.5 million jobs and a hit on Gross Domestic Product (GDP) by a notable two percent.
In the Kenyan situation, the CBK seems to have no tabs on the share of illicit flows represented by the estimated 217.6 million Ksh. 1000 notes in circulation to further hike up fears of an impending policy failure.
CBK is likely to break silence on the issue and its observed monetary policy effects when Governor Patrick Njoroge addresses a post monetary policy committee (MPC) media briefing next Thursday.
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