RBI decides to futher restrict gold imports, retracts a day later

Thus, banks are allowed to import gold on consignment basis and also provide gold loans to jewellers

The Reserve Bank of India (RBI) had a quick change of mind between Monday evening and Tuesday afternoon regarding gold import for jewellers.

On Monday, it informed banks that they could not import gold as a consignment for outright sale to jewellers. On Tuesday, it sent another e-mail that the “e-mail sent yesterday stands withdrawn”.

Which meant a restoration of the position brought about by its February 18 circular, allowing banks to so import gold on a consignment basis and also provide gold loans to jewellers.

The quick reversal has worried some official quarters, since it means imports will stay high — the estimate is 90 tonnes for this month. The purport of Monday's mail was understood to be for tightening of such inflow, a worry for the trade deficit.  

February's import was estimated to be 52 tonnes, with many having held back as they expected a cut in the tariff on gold. Since this import duty cut didn't happen in the Union Budget of end-February, and jewellers were running out of stock, March imports have surged.

Sudheesh Nambiath, senior analyst, precious metals, GFMS Thomson Reuters, said: “In February, India imported 52.6 tonnes, compared to 32.75 tonnes in February last year (when import restrictions wre much more). Duty-free imports for the purpose of exporting jewellery, medallions and coins were 12.7 tonnes. Switzerland continued to retain its dominance by exporting 10.6 tonnes.”

The gold market has remained under pressure because of the possibility of an end to the zero interest rate policy by the US Federal Reserve. The metal closed on Tuesday at Rs 26,030 per 10g at Zaveri Bazar here.

Added Nambiath for the March surge: "The recent decline in prices to the lowest level since November 17, 2014, has increased footfalls to retail outlets. On the other hand, unseasonal rains just around the harvest season and the government plan to mandate linking of the PAN card (income tax) number for any purchase above Rs 1 lakh is creating an atmosphere of demand uncertainty for the coming months.”