Reserve Bank of India Governor Raghuram Rajan on Tuesday admitted that gold smuggling was up “significantly” and there was a need to be watchful to prevent this from snow-balling.
Rajan said after the government and the RBI’s measures to restrict gold imports, smuggling has gone up because there was an incentive to smuggle gold.
“Overall smuggling is relatively small at present. That is not to say that it cannot go up. It takes a little bit of time to put the networks together. Small amount of smuggling is happening. So hopefully if we create some uncertainty about how long the measures (to curb gold imports) will last, it will prevent significant organisation (of such smuggling) from taking place.”
He said one of the bigger sources of financing smuggling will be through hawala transactions.
“It is not going to be formal financing; it is going to be through the informal financing route,” Rajan said.
Someone who wants to send dollars to India as remittance, will now pay that dollar to a smuggling group which will pay the Indian recipient in rupees and use that to finance smuggling trade.
“If that is what is going on then we should see a significant fall in remittances. That is not happening significantly, yet. We have to watch it, we have to be careful. Our custom officials have to be vigilant,” he warned.