A day after the Government raised import duty on gold to 8 per cent, the Finance Minister, P. Chidambaram, today said the surging imports are unsustainable and advised the banks to tell customers not to invest in the precious metal.
“Banks have a role to play in dampening the enthusiasm for gold...I would urge all banks to please advise their branches that they should not encourage their customers to invest in or buy gold”, he said while addressing the annual general meeting of the Indian Banks’ Association (IBA).
The Reserve Bank, Chidambaram said, has already “advised banks they should not sell gold coins...I hope a day will come when we regard gold as any other metal, it just shines a little more than copper or bronze.”
In view of the spiralling gold imports putting huge pressure on the current account deficit (CAD), the government last night hiked the import duty on gold, besides platinum to 8 per cent.
This was the second hike in the duty within six months.
The government had last raised the import duty on gold from 4 per cent to 6 per cent in January.
Drop in gold prices bad news for India
Expressing concern over rising CAD, Chidambaram said, “the gold imports have been a major contributor of the CAD. With the sharp drop in gold prices, millions were happy.
“I am afraid I was not among the millions. I told the (RBI) Governor that the drop in gold prices internationally is a bad news for India. Our fears came true.”
The gold import surged in April and May following fall in prices in the international market.
“In April we imported 142 tonnes of gold, in May we imported 162 tonnes of gold. Last year’s monthly average was 70 tonnes of gold, this year in the first two months, the average is 152 tonnes of gold”, he said, questioning “how do we sustain? How can we finance these gold imports.”