Indians want to spend the ₹2,000 note but it doesn’t look easy

• As many as 91% respondents of a survey, who attempted to use the ₹2,000 rupee note experienced difficulties”.
  
• There have been many inquiries of gold purchase via ₹2,000 notes but sales have been less due to KYC norms, say jewellers.
  
• Only 6% of survey respondents said that they have ₹1 lakh or more in ₹2,000 rupee notes.
  

In spite of many reports that say that petrol pumps, jewellery stores and even e-commerce delivery people are being flooded with ₹2,000 notes, people surveyed by LocalCircles said that they’re finding it difficult to spend the biggest denomination of cash. India’s central bank said last Friday that it’s taking this note off circulation but it will continue to remain legal tender.

Even though they’re allowed to deposit or exchange them at banks starting May 23, with a four month deadline, early indicators showed that Indians are keen on spending it away instead. But that spree doesn’t seem sustainable as retailers are unenthusiastic about accepting ₹2,000 banknotes.

As many as 91% of those who attempted to use the ₹2,000 rupee note stated that they “have experienced difficulty” in using it after the RBI announcement. The citizens surveyed said that they faced troubles at retail stores, chemists, hospitals, service providers and even petrol pumps.

“It appears that Reserve Bank of India (RBI)’s assurance of ₹2,000 rupee notes being a legal currency despite plans to withdraw it has increased fears about whether it would remain so after September 30 and fears of loss if it is not accepted as a legal currency,” the LocalCircles survey said. There have been reports that the government intends to demonetise the denomination by the end of the year.

A Kotak Institutional Equities report also said that since it’s legal tender, it will boost consumption. “In fact, notes which are not deposited by individuals – undisclosed income, deposits above certain limits – could move to high-value spends such as gold and jewellery, high-end consumer durables, and real estate, which then reaches bank deposits,” added the Kotak report.

KYC versus the gold rush

The RBI governor said that there is no need for people to rush to banks as there is four months’ time. Reports say that many people have been attempting to convert ₹2,000 rupee notes into gold and silver instead. But jewellers say that like banks have not seen a rush, there has been no panic gold buying either.

"There have been a lot of inquiries about purchasing gold or silver with ₹2,000 notes, hence the higher footfalls. However, due to strict KYC (know-your-customer) norms, actual purchase has been less," Saiyam Mehra, chairman of the All India Gem and Jewellery Council (GJC) told PTI.

Based on a survey of small jewellers in various cities, the All India Jewellers and Goldsmith Federation in a statement clarified that “none of them accept rupees ₹2,000 notes for gold in premium”.

As per RBI, people can exchange these banknotes for notes of other denominations, up to a limit of ₹20,000 at a time, at any bank. Existing Income Tax requirement of PAN for deposits of ₹50,000 or more in bank accounts will apply on ₹2,000 notes as well.

How much cash do people hold?

India has as much as ₹3.62 lakh crore in ₹2,000 rupee notes as of March 31, 2023, as per RBI data. While one might never know how much lies in which coffer, about 64% of the LocalCircles survey respondents said that they do not hold notes in the said denomination.

Only 6% indicated that they have ₹1 lakh or more in ₹2,000 rupee notes.

Moreover, 15% said that they have up to ₹20,000 rupees – which can be exchanged at banks with no hassle.

And, 7% of respondents indicated that they have between ₹20,000-40,000 rupees. Only 2% have ₹2-10 lakh and another 2% ₹10 lakh in said notes. Then there were another 2% who “don’t want to disclose”.

Though citizens are facing troubles, 64% of the survey respondents said that they support the government’s move of withdrawing from circulation the ₹2,000 rupee note.