The RBI said in a statement, "It is clarified at the outset that there is sufficient cash in the RBI vaults and currency chests. Nevertheless, printing of the notes has been ramped up in all the 4 note presses. The shortage may be felt in some pockets largely due to logistical issues of replenishing ATMs frequently and the recalibration of ATMs being still underway. RBI is closely monitoring both these aspects."

"Further, as a matter of abundant precaution, RBI is also taking steps to move currency to areas which are witnessing unusually large cash withdrawals," the statement added.

Union Finance minister Arun Jaitley said: "Overall there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by 'sudden and unusual increase' in some areas is being tackled quickly."

Economic Affairs Secretary Subhash Chandra Garg told reporters that the government has decided to increase printing of Rs 500 notes by five times to meet the "unusual" currency demand, reported Press Trust of India. The government, he added, suspects that Rs 2,000 notes are being hoarded as they are not coming back into the circulation fast enough.

Officials of the Reserve Bank of India, who held a meeting with finance ministry officials, said cash was back in demand and people were hoarding it. "Currency in circulation has not grown despite growth in economy after the demonetisation in November 2016. Currency in circulation on November 4, 2016, was Rs 17.74 lakh crore. Currency in circulation now stands at Rs 18.04 lakh crore," RBI sources said.

State Bank of India chairman Rajnish Kumar said the problem lies largely in Andhra Pradesh, Telangana, Karnataka and parts of North Bihar and it was wrong to call it a currency shortage. "One reason could be that the procurement season has come and the payment to farmers has gone up. In Maharashtra and Mumbai, there is no cash crunch as far as SBI is concerned," Mr Kumar told NDTV.

Junior finance minister Shiv Pratap Shukla had earlier given a time-frame of three days to resolve the problem. "We have cash currency of Rs 1,25,000 crore now. Some states have less currency and others have more. The government has formed state-wise committees and the RBI has also formed a committee to transfer currency from one state to other."

In Hyderabad, many say they have been unable to withdraw cash since yesterday. "We have visited several ATMs since yesterday but it is the situation everywhere," said one of the residents. A person in Varanasi told news agency ANI, "ATM Kiosks are not dispensing cash. We have visited 5-6 ATMs since morning. We need to pay for the admission of children and groceries."

The Congress has questioned whether the situation was the result of "gross mismanagement or a deliberate move". "Modi-ji has destroyed the banking system. Nirav Modi fled with Rs 30,000 crore and the PM didn't utter a word. We were forced to stand in queues as he snatched 500-1000 rupee notes from our pockets and put in Nirav Modi's pocket," party chief Rahul Gandhi said.