Reserve Bank of India further tightened the screws on gold imports by extending the restrictions on imports to nominated agencies and premier trading houses. The RBI had put similar restrictions on banks in May.
The central bank said that any import of gold on consignment basis by both nominated agencies and banks shall now be permissible only to meet the needs of exporters of gold jewellery.
Nominated agencies such as MMTC, the State Trading Corporation of India and State Bank of India will be affected by this move. All the trading agencies involved in gold exports will also be impacted by the notification, which came into force with immediate effect.
CAD worries
The central bank and the Government have been worried about the increasing import of gold citing the “adverse” impact it has on the country’s current account deficit.
In a couple of public announcements, Finance Minister P. Chidambaram asked people to contain their passion for gold.
Further, the Reserve Bank of India said that all Letters of Credit (LCs) to be opened by nominated banks/agencies for import of gold under all categories will be only on 100 per cent cash margin basis.
This means that all agencies, including banks, will have to pay for the full amount in cash upfront for import of gold on consignment basis. Bulk of the gold imported by nominated banks is on consignment basis, whereby the banks concerned do not have to fund these stocks, said the RBI in a notification earlier.
The RBI also said, “All imports of gold will necessarily have to be on documents against payment (DP) basis. Accordingly, gold imports on documents against acceptance (DA) basis will not be permitted.”
“Physical demand of gold will definitely come down,” said T. Gnanasekar, Director of Mumbai-based commodity and forex research firm Commtrendz Research and Fund Management.
However, gold is not the only commodity adding to the current account deficit, he added.
Traders and experts believe that gold demand will come down in any case till October, when the festival season kick-starts.
satyanarayan.iyer@thehindu.co.in