Rs 2,000 note withdrawal: Large retailers, traders see red; small merchants expect bump in biz

If the 2016 demonetisation, announced on 8 November, had created widespread panic among traders and consumers alike, the next phase of the saga - announced two days ago - has evoked mixed reactions. 

As the Reserve Bank of India (RBI) decides to withdraw the Rs 2,000 currency notes - introduced six-and-half-years ago following the demonetisation - a majority of the small traders and retailers are pinning their hopes on a buying spree among consumers that could boost their businesses. But large merchants with major cash pile at their disposal - mostly in Rs 2,000 currency notes - are jittery.

Also read: No form, no identity proof required to exchange Rs 2,000 notes, SBI informs branches

According to the Confederation of All in India Traders (CAIT), while the move is unlikely to impact small traders and retailers, it will surely hit big businesses with a large pool of cash. “This step of the government will not affect the trade of the small traders but will certainly hit the big and affluent class which might have stocked Rs 2,000 notes in large quantity,” it said in a statement.

Also read: Gold rush: Rs 2,000 note withdrawal triggers panic buying of jewellery

Kumar Rajagopalan, CEO of the Retailers Association of India - the apex industry body of retailers in the country - told Business Today that, unlike the 2016 demonetisation, the majority of the retailers would continue to accept the Rs 2,000 notes. “We don’t see any major disruptions in transactions as the RBI has clearly stated that Rs 2,000 note would remain a legal tender till 30 September. While there is no clarity on what happens after the deadline, for now, consumers shall not face any issues if they are making purchases with Rs 2,000 notes,” he says. 

However, exceptional incidences of retailers and traders not accepting the tender could not be ruled out. Further, consumers may face a challenge if they attempt to change the Rs 2,000 notes at retail counters.

According to Sanjiv Mehra, President of Delhi’s posh Khan Market Association, the extent of cash transactions through Rs 2,000 currency notes varies across different types of businesses. “But I expect that people with loads of cash would now be forced to make purchases with the Rs 2,000 notes and that would give a bump up to many of our businesses that were otherwise witnessing a lull for quite some time,” he tells Business Today.

According to Rajagopalan from RAI, while the extent of cash transactions has come down over the past few years, retailers continue to deal in cash to the tune of 25-40 per cent of their total turnover - depending on the type of their businesses.

CAIT hopes that the move will further accelerate the country’s digital adoption. “It is a right step in the direction of motivating and encouraging citizens to accept and adopt digital payments in their day-to-day purchasing,” it says.