RBI easing gold import norms to favour jewellery market

The Dollar Business Bureau A latest move by the Reserve Bank of India late Wednesday evening, for the lift of ban on gold imports for nominated banks is expected to favour the domestic market. “Nominated banks are now permitted to import gold on consignment basis. All sale of gold domestically will, however, be against upfront payments. Banks are free to grant gold metal loans,” said RBI in its notification released late Wednesday evening. Through this move, the nominated banks of India will be able to import gold from the international banks and lend it to the local jewelers, which will not only encourage the banks to reach good margins, but also favours the domestic supplies. Prior to this in January 2015, the government’s move to lift few restrictions on gold imports was hailed by the Indian gold Industry. In its report, an international research agency had said that the government’s withdrawal of certain restrictions on gold imports will provide a fillip to the jewellery industry which has been recording lower than expected volumes in the last few months. The report had also said that the improvement in availability and reintroduction of the low cost gold metal loans will provide a better market scope for the domestic jewellery market. Earlier this week, the Indian Trade Ministry was quoted to have asked the Finance Ministry to consider a sharp cut on gold import duties from 10% to 2%. The Ministry was also quoted to have stated that the current account deficit was under control and the controlled account deficit will provide scope for the import duty cut on gold. In its recommendations to the upcoming Union Budget, the All India Gems and Jewellery Trade Federation (GJF) had also asked the government to reduce gold import duty cuts from 10% to around 2% to strengthen the domestic gold industry and to curb the smuggling activities. In its latest notification, the RBI further said that the obligation for exports under 20:80 scheme will remain for the unutilized gold. The notification says that 20% of the unused gold should be exported before importing new gold. A report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the World Gold Council (WGC) says that India, as a top importer and consumer of gold, should frame a Gold Policy to manage imports, encourage exports and facilitate development of the infrastructure needed to ensure the Indian gold market functions to maximum effect.  

This article was published on February 19, 2015.