Jewelers in India, the world’s second largest gold consumer after China, have started receiving more inquiries to buy gold or silver soon after the Reserve Bank announced the withdrawal of Rs 2,000 notes from circulation.
However, there is no panic buying of the precious metal unlike the situation seen during demonetisation in 2016, jewelers body GJC said recently. In fact in the last few days, actual buying of gold against Rs 2,000 notes has been low due to Know Your Customer (KYC) norms, though sources said some jewelers have started charging a premium of 5-10 per cent . Gold at the level of Rs 66,000 per 10 grams.
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“There have been a lot of inquiries about buying gold or silver with Rs 2,000 notes, hence the high footfall on Saturday. However, actual purchases have been low due to stricter KYC norms,” said Saiyam Mehra, president of apex industry body All India Gems and Jewelery Domestic Council (GJC). PTI,
“There is no panic as such” and the footfall has also reduced as the RBI has kept a large window of four months as the deadline to withdraw pink notes from the market, he added.
However, diamond industry experts like Ishwar Surana, MD, Raj Diamonds, Bangalore suggested that there has been a sharp increase in cash transactions and they are definitely seeing some congestion in the market.
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On 19 May, the Reserve Bank of India (RBI) announced the withdrawal of Rs 2,000 notes from circulation, but gave the public time till 30 September to either deposit such notes in accounts or turn them over to banks. It has asked banks to stop issuing Rs 2,000 notes with immediate effect.
Mehra further said that the implementation of the Goods and Services Tax (GST) and the Bureau of Indian Standards (BIS) hallmark have encouraged jewelers to organize and do formal business.
“Higher denomination currency notes generally require cash to be transacted, which has now become insignificant in India’s jewelery industry as consumers are more inclined towards digital formats. Therefore, the withdrawal of Rs 2,000 notes will not have a major impact on India’s gold and jewelery business.”
However, reportedly, several jewelery retailers sold gold against Rs 2,000 notes on Saturday and that too at a premium rate.
Saurabh Gadgil, Chairman and MD, PNG Jewelers said this PTI, “The practice of taking Rs 2,000 notes at a premium rate in exchange for gold is something that can exist only in the unorganized sector. Organized jewelery players stay miles away from such things.”
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Bachraj Bamalwa, partner, Nemichand Bamalwa & Sons, said, “Some inquiries are on, but there is no rush to buy gold. It should increase from tomorrow.”
He said that the jewelers are selling gold by following KYC norms as per Income Tax as well as Anti-Money Laundering laws.
However, Surana said the demonetisation of Rs 2,000 notes has created a sense of urgency among people to protect their monetary value by investing in jewellery. People will aim to do away with the need to exchange or deposit Rs 2,000 notes in banks and will come forward to spend on luxury items like diamond jewellery, he underlined.
“We believe there will be a short-term increase in demand as people try to get rid of their Rs 2,000 notes and we expect a 20-30 per cent increase in sales in the near future. This will also help growth a bit as Consumption is expected to increase. However, we will continue to maintain strict KYC norms.”
Unlike the demonetisation of Rs 500 and Rs 1,000 notes in 2016, the number of holders of Rs 2,000 notes is low as the RBI stopped printing them in 2018-19 and they are rarely in circulation.
Any purchase of gold, silver, jewellery, or precious gems and stones below Rs 2 lakh does not require the Permanent Account Number (PAN) or Aadhaar of the customer as a mandatory KYC document.