Bizarre as it may seem but the scrapped Rs500 and Rs1,000 notes are now reported to be selling at a premium in Kolkata's Burrabazar at a time when people across the country are queuing up outside banks to get rid of these old demonetized notes.
The scrapped old notes of Rs500 and Rs1,000 are exchanged at Rs550 and Rs1,100, respectively, in the trading hubs of Burrabazar, say reports.
According to a report in The Times of India, which cited a man sitting with wads of new currency notes in one of the shops in Burrabazar, the old Rs1,000 notes were selling at a discount at about Rs800 to Rs850 in exchange for new legal tender.
The sudden reversal in exchange rate is reported to have been triggered by shell companies who need to shore up 'cash in hand' in their balance sheets that show huge paper transactions. These currencies are needed to justify the paper transactions before the third quarter ends on 31 December.
Since the 'cash in hand' shown in the balance sheet is the amount held by a company in the form of notes or coins, companies need old notes to show 'cash in hand' that is not deposited in the bank. However, it does not mean the money lies in physical form with the company.
Companies are now forced to show cash after income tax officials came across a number of cases where balance sheets have shown large amounts of 'cash in hand' while the physical cash was much less.
Ever since the 8 November demonetisation announcement by Prime Minister Narendra Modi, business people, especially in Kolkata, have adopted every possible means to either exchange the notes or get some deposited in banks.
With the third quarter coming to an end, and with little cash left to show as 'cash in hand', companies are looking at new ways of raising enough of old cash..
The premium is also due to the 30 December deadline for depositing all the old Rs500 and Rs1,000 notes in banks, which led to the sudden surge in demand for the scrapped currency.