Saturday, January 25, 2014

Rush to spend old notes spawns new exchange business
Trust enterprising Mumbaiites to turn an adversity into a business opportunity. 

The Reserve Bank of India's decision to withdraw pre-2005 currency notes has spawned a new exchange trade in the city, involving replacement of old notes with new ones for a commission of 2 per cent. 

Despite the RBI's clarification that pre-2005 notes will remain legal tender post March 31, the central bank's deadline for withdrawing these notes from circulation, the decision has set off panic in the city and small businesses have begun reporting receiving large number of these notes. 

While the RBI has made it clear that anybody can walk into a bank and exchange pre-2005 currency notes for new ones, not many Mumbaiites took up the offer on Thursday and Friday, fearing it could set the Income Tax department after them. 

Though the RBI has not mentioned any date beyond which pre-2005 currency notes will become worthless, people believe this will happen sooner than later. 

Sauji Bachhu Patel, manager-cum-cashier at Daily Needs, a super market on Palm Beach Road, Nerul, said he asked his staff to start separating pre-2005 currency notes in the store's daily collection on Thursday. "I was surprised by the amount of pre-2005 notes in the day's collection. It's clear that people have started dumping old notes at retail outlets," he said. 

Narendra Singh, owner of Blue Star Wines, Santa Cruz, too received a large number of pre-2005 notes on Thursday and the trend continued on Friday. "I am sure it's going to become a deluge by Monday," he said. 

The buzz in the exchange trade on Friday was that the commission for exchanging pre-2005 notes could double by next month to 4 per cent and touch 10 per cent in March. 

RBI Governor Raghuram Rajan at a lecture in New Delhi on Thursday said there are security factors attached to the decision, which had nothing to do with the elections. According to RBI sources, the pre-2005 notes have fewer security features and thus their copies are easier to produce. 

While currently one can walk into a bank and exchange any amount of pre-2005 notes, from July 1, to exchange more than 10 pieces of Rs 500 and 1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which the exchange will take place. 

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