India allows more banks to import gold

Published March 20, 2014
The move could boost gold supplies and bring down premiums for the metal in the world’s second-biggest consumer after China. — File photo
The move could boost gold supplies and bring down premiums for the metal in the world’s second-biggest consumer after China. — File photo

MUMBAI: India has allowed five domestic private sector banks to import gold, in what industry officials say could be a significant step towards easing of tough curbs on the metal imposed last year to cut the country’s trade deficit.

The move could boost gold supplies and bring down premiums for the metal in the world’s second-biggest consumer after China.

India’s central bank has allowed gold imports by HDFC Bank, Axis Bank, Kotak Mahindra Bank, Indus Ind Bank and Yes Bank, officials at the respective banks told Reuters.

Two industry sources confirmed the names of the banks. They and the bank officials did not want to be named as they are not authorised to speak to media.

India enforced the so-called 80/20 rule in July, making it mandatory to export a fifth of all gold imports. Under that rule, only six banks and three state-run trading agencies that had facilitated export of gold or jewellery in the past three years were allowed to import. The six banks were mostly state-run lenders.

The Reserve Bank of India — the central bank — has now permitted gold imports within prescribed limits by the private banks even though they had not facilitated any exports of metal or jewellery in the past three years.

“They have decided upon limits on quantities depending upon the number of (current) customers you have for exports,” said Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank.

The Reserve Bank of India did not immediately respond to a request for comment.

The move to allow more banks to import gold may raise shipments to about 40 tonnes per month from more than 20 in February, industry officials said. India used to ship in as much 70 tonnes per month, the biggest import after oil that had pushed the current account deficit (CAD) to a record high in the year ended March 2013.

“Supplies will be smooth from now and I think premiums will come down,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation. “This looks like just a beginning to the further easing of 80/20 rule.”

India used to be the No. 1 buyer of gold before the levy of a record 10 per cent import tax in stages and other restrictions led to a sharp cut. Premiums hit a record of $160 an ounce in December, triggering smuggling and forcing industry officials to call for a repeal of the curbs.

Further major relaxations of the curbs are likely only after a new government is formed around June, officials involved with policy making said.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.