Rs 2,000 Currency Notes Find Their Way To Small Businesses Ahead Of Exchange Day
Petrol pumps, eateries and groceries are some of the places that have seen a jump in the highest denomination notes.
It's 11:30 a.m.—90 minutes after the Punjab & Sind Bank's Connaught Place branch opened on May 22. The atmosphere is business as usual; the cash counter has no more than a two-person queue. Located in the heart of one of the busiest marketplaces in New Delhi, the branch manager of the public sector bank assured this reporter that any panic was limited to social media.
On Tuesday, banks will open their doors to exchange Rs 2,000 notes for smaller denominations. However, small business owners may also face an increased onslaught of the now withdrawn high-value currency notes in their cash register. Petrol pumps, eateries, and groceries are some of the places that have seen a jump in the highest denomination notes.
MSMEs, small traders, and cash-oriented sectors—such as agri and construction—could feel the pinch in the near term, with a reluctance to accept the Rs 2,000 note in smaller towns and villages, wrote QuantEco Research's Economist Yuvika Singhal in a LinkedIn post.
"Discretionary spending, especially in urban India, on some durables and services could see a spurt in a bid to utilise the stock of Rs 2,000 notes. Gold, small appliances, home furnishing, mobile phones, and membership services of salons and gyms could receive a shot in the arm," she said in the post.
However, banks—both private and publicly owned—have faced little cause for concern on Monday, which marks the second full working day following the RBI's announcement withdrawing Rs 2,000 notes from circulation.
Bank managers expressed cautious optimism as they gear up to exchange Rs 2,000 notes—the highest value currency notes—for smaller denominations from Tuesday. The RBI has encouraged the public to submit their Rs 2,000 notes to banks by Sept. 30, offering a 134-day window.
The Rs 2,000 note withdrawal won’t impact the economy, TV Somanathan, India's finance secretary, told CNBC TV18. The note continues to be legal tender, and there are several months to exchange it, he said.
According to two other branch managers from HDFC Bank Ltd. and Canara Bank, who chose to speak on condition of anonymity, while deposits have begun, there have been muted crowds.
There have been no complaints in terms of ATMs either, as they stopped stocking Rs 2,000 notes in their machines almost six months earlier, said one of the managers quoted above. With the printing of the high value notes stopping as early as 2019, the circulation of the Rs 2,000 currency note to the bank had also dwindled much before the announcement.
Haldiram's Store, Connaught Place, New Delhi. (Source: Janani Janarthanan)
(Source: Janani Janarthanan)
UPI Easing The Shift
As crowds started trickling in for breakfast at Haldiram's Connaught Place branch, Deepak Maurya, store manager of one of the biggest branches in New Delhi, told BQ Prime that 60–65% of their transactions are through UPI. "We don't deal in cash a lot. While we are facing an initial spike, perhaps 10-15 notes more than usual, but it is all within manageable levels," Maurya said.
"However, we have noticed that some people are buying smaller value items in exchange for their Rs 2,000 notes since we began refusing (to give) change," he said.
As of April 2023, UPI transactions in the country had crossed 8,898.14 million in volume and Rs 14 lakh crore in value.
The situation is still under control but could soon change, said Kamal Sondhi, who owns a Bharat Petroleum pump in the same area. He admits that people have been turning in more of Rs 2,000 notes. His pump manager shows a small wad of Rs 2,000 notes collected through the day, and said they might soon run out of change for customers.
The pump is looking to impose a value and capacity-based limit on accepting the highest currency notes. This could mean Rs 2,000 notes in exchange for smaller refills of Rs 100–200 will be discouraged.
The RBI's decision to withdraw the Rs 2,000 notes has created a difficult situation at petrol pumps across the country as was faced during the 2016 demonetisation drive, the All India Petroleum Dealers Association said in a statement.
The association also highlighted that the majority of the customers were trying to use Rs 2,000 notes for purchases of smaller value refills like Rs 100-200.
The challenge would likely begin tomorrow at banks as more people would come in to exchange their high-value currency, the second branch manager mentioned above said.
Bank branch managers like the one at Punjab & Sind are also preparing their locations and exploring options like opening a second cash counter, subject to customer inflow.
Banks have been advised by the RBI to offer appropriate infrastructure at the branches—such as shaded waiting space, drinking water facilities, etc.—considering the summer season. They are also required to maintain daily data logs on deposits and exchanges of Rs 2,000 notes, according to a recent RBI notification.