Gold import licence norms may be tightened

The Ministry of finance in consultation with the Reserve Bank of India is reviewing the licencing norms for gold import. 

 

After curbs on currency derivative trading, these measures will make gold imports limited to actual users of gold in India and not investment. 

 

According to the sources close to the development, the licencing norms may be tightened for entities importing gold to ensure that imported gold is used for actual users of gold to make jewellery or other uses. This is intended to cut down imports made by entities for investment and trading purposes. 

 

Similarly, the gold trading norms on commodity exchanges also may be tightened so that importers of gold for actual uses like making of jewellery and retail sale only do hedging to safeguard volatile price fluctuations overseas. In fact the know your customer (KYC) norms and use of permanent account numbers (PAN) will be further tightened." What is adding to worry of actual demand for gold is the speculative trading on gold which is not only triggering high prices but easy profits through investments. The retail already has substancial gold investments", explained an official. 

 

The license norms for allowing banks as nominated agencies are primarily targeted as they primarily engage in sale for investment and trading purposes. Some official recommendations even pitch for restricting gold import licenses only for state trading corporations and actual refiners and temporarily restrict the licenses for others. 

 

According to officials, the existing measures taken for curbing gold imports have brought down the scale of imports in the last few months. Ensuing months are expected to show further decline in gold imports as the importers will be through with their existing contracts signed for gold import consignments overseas. These contracts had been entered into at least three months before and cancelling them abruptly will costs additional expenditure. Therefore now most of these contract periods are closing , following months will register further decline in gold imports. 

 

In May 2013, import of gold touched a record of 162 tonnes leading to a hike in import duty to 8 percent and tight restrictions on supplies. Last month the RBI restricted lending for gold imports unless it is for actual use in the domestic market and not for investment. The central bank made 100% cash margin compulsory for both buyers and suppliers credit.