RBI draft report backs limits on gold importers

MUMBAI Wed Jan 2, 2013 8:13pm IST

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 25, 2011. REUTERS/Stringer/Files

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 25, 2011.

Credit: Reuters/Stringer/Files

Related Topics



MUMBAI (Reuters) - The Reserve Bank of India (RBI) has asked that volume and value restrictions be placed on gold imports by banks and agencies such as MMTC (MMTC.NS) to help rein in a current account gap which touched an all-time high in the July-September quarter.

Such banks and agencies control about 56 percent of the gold imported into India, which vies with China as the world's largest buyer of the precious metal.

A ballooning current account deficit (CAD) is a major concern for the government, with gold imports the biggest contributor to imports after crude oil.

New Delhi has doubled the import duty on gold to 4 percent in its annual budget for 2012/13 in a bid to discourage imports.

"Setting value or quantum limits for canalising agencies and banks to import gold can also reduce the demand for gold. Such limits can be reviewed periodically," RBI said in a draft report, which is open for public comments until January 18.

Separately on Wednesday, the federal government called for making gold imports more expensive to help address the current account deficit, which touched a record of 5.4 percent to gross domestic product in the July-September quarter.

The central bank's draft report said controlling excessive demand for gold could help check imports, suggesting banks introduce new gold-backed financial products.

Gold imports rose 9 percent to 223.1 tonnes in the July-September quarter, after a 56 percent fall to 131 tonnes in the April-June quarter.

Analysts predict a sharp recovery in the final quarter due to peak festival and wedding season buying.

The draft report said if gold imports in India had grown by 24 percent - the average annual rise in global demand seen over the last three years - instead of 39 percent in 2011/12, the current account deficit would have been $6 billion lower and the CAD-GDP ratio 3.9 percent instead of 4.2 percent.

India imported a record 967 tonnes of gold in 2011.


The central bank recommended the use of 20,000 tonnes of idle gold stored by households in India, which is about three times the holdings of the U.S. Federal Reserve, by introducing gold bonds, gold deposit schemes and tax incentives.

"The impounded gold through gold bonds can be used to reduce the demand for gold imports. There can be a lock-in period," the draft report said.

Indian banks might also consider expanding their share of gold jewellery loan portfolios to monetise huge stocks for productive purposes, the report said.

A working group at the central bank also asked for rationalisation of interest rates charged by non-banking financial companies on gold loans by imposing a cap on them.

(Editing by Jason Neely)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 


Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 



Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage