The Reserve Bank announcement on a cutoff date for exchanging all currency notes issued before 2005 has sparked conversion by holders of unaccounted cash, says sources in the bullion market.
They say such holders have started slowly converting part of the pre-2005 notes to gold, silver and precious stones. Jewellers have started accepting pre-2005 notes at an average discount of two -four per cent. As yet, say sources at the bullion hub in south Mumbai's Zaveri Bazar, there is no panic among their consumers regarding old currency notes.
Zaveri Bazar here and Sonapatti in Kolkata are two big centres where black money gets converted, with certain groups active in doing so in even normal circumstances. At present, it appears, consumers are approaching brokers and jewellers with a smaller amount of older currency notes, say Rs 10-25 lakh; the commission would be low till March-end. After that, RBI has said, identification proofs might be needed.
The syndicate in this regard had established a network for converting currency notes much prior to the RBI directive. They allegedly also operate seven paper companies', claiming to be in businesses generating cash such as restaurants, the medical profession and so on. Some bank staffers help; the same network would be utilised for converting pre-2005 high denomination notes.
A source said many small traders holding black money had started stocking raw material or commodities in which they deal, in return for old notes.