The Reserve Bank of India (RBI) has instructed importing banks to refrain from selling gold imported on consignment basis to jewellers. The clarification on sale of gold was issued by the RBI late evening yesterday. The RBI decision is likely to limit supply of gold, as jewellers will now have to place order with any of the importing agency and wait for the delivery.
Earlier in February this year, the RBI had permitted banks to import gold on consignment basis. It also allowed banks to provide gold metal loans to jewellers. However, the RBI stated that quite a few banks were found to be selling this gold to jewelers against cash payment. This has lead to increased gold imports by banks, as the scheme allows banks to make payment for the imported gold only upon realization of the money after sale.
According to the notification issued yesterday, banks can no longer sell the imported gold to jewellers. This essentially means that the gold imported by banks on consignment basis can now be used only for providing gold metal loan to jewelers. Industry experts believe that the banks may try to expand their gold metal loan portfolio by importing more gold. However, the RBI decision is feared to inflate open market premiums on the yellow metal. The premiums on gold had fallen to $2-$3 last week from $5-$6 from a week before.
Meantime, the country’s gold imports totaled 52.59 tonnes on gross basis, surging over 60% when compared with the previous year. India’s gold imports had totaled 32.75 tonnes in February 2014. As per industry estimates, the March gold imports by the country are likely to touch 90 tonnes as jewellers are seen stocking gold ahead of upcoming marriage season. The jewellers had gone completely out of stock, as a result of deferring their purchases in anticipation of announcement of import duty curbs in budget.
Zhejiang Yaang Pipe Industry Co., Limited (www.yaang.com)