Rs 2,000 note: Hawala rate at Rs 91 for $; exchange for gold at Rs 70K

Those in possession of unaccounted money are tensed up owing to the order on the withdrawal of Rs 2,000 notes by September this year and are taking the familiar routes to dispose them of.

They are exchanging the notes for gold and dollars in the grey/unaccounted market, leading to huge premiums (over official rates) for both asset classes.

On Friday night in New Delhi, gold was sold at Rs 68,000 per 10 gm in exchange for Rs 2,000 notes. In official markets, gold has been quoting at Rs 62,000-63,000 (with goods and services tax). However, some markets where the flow of unaccounted money is high have seen gold quoting between Rs 70,000 and Rs 75,000.

In Ahmedabad, on Friday night, gold to be bought for Rs 2,000 notes opened at Rs 75,000 though prices slipped to Rs 67,000 levels on lower demand.

In cities of the south, Kolkata, and even Mumbai, the price is around Rs 70,000 and above.

A dealer said “this time panic and rush are not like in 2016 because the magnitude is different. More time has been given, the notes remain valid, and, more importantly, in general people do not hold much of them. Politicians, real estate players, underworld leaders, and some traders dealing in cash hold most of the notes.”

Players in the grey market for dollars seem to have got wind of the withdrawal, and, as a result, from Wednesday itself the hawala rate, which was Rs 85.5 to the dollar, had started rising to Rs 87 and the next day to Rs 88. It is now hovering at around Rs 91.

However, the rule on tax collection at source on high-value overseas transactions, though relaxed later, has increased demand for hawala.

The hawala market has been active for some time because the payment for smuggled gold is done by buying dollars there. Since the profit margin for such gold is very high, premiums this time are limited. In 2016, gold was quoting at 30-40 per cent to its official price.

In 2016, when demonetisation was announced, gold, hawala and crypto currencies were major routes to convert the banned notes. This time they are gold and hawala. However, after demonetisation several jewellers faced the ire of the income-tax department. As a result, associations of bullion dealers have become alert.

The Indian Bullion and Jewellers Association has informed its members “Rs 2000 note is a legal tender (till 30-09-23) and hence jewellers can sell gold against (these) currency notes”.

However, the message further said according to the guidelines of May 4, 2023, under the Prevention of Money Laundering Act, KYC is advised for cash transactions above Rs 50,000. For cash transactions above Rs 2 lakh, the PAN card is mandatory.

The association has further said if any jeweller dealing in cash with a single person for Rs 10 lakh or more at a time or in a series of transactions, the matter has to be reported to the Financial Intelligence Unit.

A bullion dealer cautious in dealing in Rs 2,000 notes has said he expects some standard practice for banks to be followed nationally.