Go slow on gold coin sales, Reserve Bank tells banks

However, D Subbarao governor of the central bank has hinted that RBI will not ban such sale

Reserve Bank of India (RBI) Governor D Subbarao on Tuesday said the central bank had asked banks to go slow on gold coin sales. He, however, added RBI didn’t favour barring lenders from selling the commodity.

“We don’t want to ban banks from selling gold. People who want to buy should have the access. But we don’t want banks to aggressively market the sale of gold,” Subbarao said while interacting with the media after a conference. “For people who want to buy gold for a saving purpose…we recognise a route should be available for that. But buying gold should be only for a genuine purpose,” he said.

Recently, the central bank took several steps to curb the demand for gold, which wasn’t just widening the country’s current account deficit, but also taking a toll on the flow of savings to financial instruments such as bank deposits.

RBI said banks couldn’t lend against gold coins weighing more than 50 g.

“We don’t want to choke gold as collateral for loan. But we don’t want that to be a business,” Subbarao said.

In its annual monetary policy review on May 3, RBI had imposed restrictions on the import of gold. It had said gold imports by banks should be restricted to a consignment basis to meet the genuine needs of exporters.

Gold imports have been a concern for both the government, as well as the central bank, as India’s current account deficit had soared to a record high of 6.7 per cent of gross domestic product in the quarter ended December.