Jewellers have started receiving more queries about gold and silver after the RBI’s announcement to withdraw 2,000-rupee notes from circulation, jewellers’ body GJC said on Sunday (May 21).
However, there is no panic buying of the precious metal unlike in 2016, during demonetisation, the GJC added. India is the world’s second largest consumer of gold after China.
Sources said some jewellers have started charging a 5-10% premium, taking gold prices to Rs 66,000 per 10 grams. Currently, gold prices have corrected to around Rs 60,200 per 10 grams in the country.
More query, less purchase
However, the actual gold purchase in exchange for 2,000-rupee notes has been low in the last two days due to strict Know your Customer (KYC) norms.
“There have been a lot of inquiries about purchasing gold or silver with 2,000-rupee notes; hence the higher footfall on Saturday. However, due to strict KYC norms, actual purchase has been less,” All India Gem And Jewellery Domestic Council (GJC) chairman Saiyam Mehra told PTI.
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However, there is “no such panic” and footfalls have also settled down as the RBI has kept a larger window of four months for withdrawing the pink notes from the market, he said.
On May 19, the Reserve Bank of India (RBI) announced the withdrawal of 2,000-rupee notes from circulation but gave the public time till September 30 to either deposit such notes in accounts or exchange them at banks. It has asked banks to stop issuing these notes with immediate effect.
Organised vs unorganised sectors
Mehra said the implementation of goods and services tax (GST) and Bureau of Indian Standard (BIS) hallmarks has encouraged jewellery manufacturers to become organised and carry out formal business.
“Large-denomination currency notes are normally required to deal in cash, which has now become insignificant in India’s jewellery industry, and consumers are more inclined towards digital formats. Therefore, the withdrawal of 2,000-rupee currency notes will not have a major impact on India’s gold and jewellery business,” he added.
However, according to sources, many jewellery retailers did sell gold on Saturday against 2,000-rupee notes and that, too, at a premium rate.
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PNG Jewellers chairman and managing director Saurabh Gadgil said, “The practice of taking 2,000-rupee notes in lieu of gold at a premium rate is something that may exist only in the unorganised sector. The organised jewellery players stay miles away from such things.”
Nemichand Bamalwa & Sons partner Bachhraj Bamalwa said, “There are some inquiries, but there is no rush for gold buying. It should increase from tomorrow.”
Compliances in place
Jewellers are selling gold complying with KYC norms as per the Income Tax Act, as well as anti-money-laundering laws, he said.
Commtrendz Research co-founder and director Gnanasekar Thiagarajan said demonetisation has always led people to gold. However, the difference now is that there are a lot of compliances in place.
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Unlike the demonetisation of 500-rupee and 1,000-rupee notes in 2016, the number of people holding 2,000-rupee notes are fewer, as the RBI had stopped printing them in 2018-19 and they were rarely in circulation.
Any purchase of gold, silver, jewellery, or precious gems and stones above Rs 2 lakh require the PAN or Aadhaar of a customer as mandatory KYC documents.
(With agency inputs)