RBI further restricts gold imports

The central bank asked banks not to sell gold imported on consignment basis to jewellers on outright basis

The Reserve Bank of India yesterday late evening asked the banks not to sell gold imported on consignment basis to jewellers on outright basis. The clarification is expected to tighten gold imports.

On 18th February the central bank allowed banks to import gold on consignment basis and also allowed them to provide gold metal loans to jewellers. However, banks were found importing gold on consignment basis and selling that to jewellers against full payment. This has increased imports as jewellers were buying gold virtually off the shelf. Banks were also considering gold imported on consignment basis to provide gold metal loans to jewellers.

Now RBI has said that gold imported on consignment basis, where payment is to be made after realisation of money after sale, can be used only for providing gold metal loans to jewellers. The loan is for a tenure of 180 days. Prithviraj Kothari of RiddhiSiddhi Bullion said, "The move could tighten supply of gold as jewellers will have to place order for import with importing agency and wait for delivery."

Open market premium, which fell to $2-3 per ounce, may also inch up. However, an industry veteran said that banks will now try to increase gold metal loans by importing gold on consignment basis.

Imports in March have been rising after import duty cut on gold didn't materialise in budget and jewellers were out of stock and was expected to touch 90 tonnes. The latest clarification by the RBI through an email sent to importing banks would restrict import flow, said a jeweller. Import of gold in February was estimated at 52 tonnes on gross basis.

Sudheesh Nambiath, Senior Analyst- Precious Metals, GFMS Thomson Reuters said: "In February 2015 India imported 52.59 tonnes of gold compared to 32.75 tonnes in February last year. Duty- free imports for the purpose of exporting jewellery, medallions and coins were at 12.67 tonnes. Switzerland continued to retain its dominance by exporting 10.59 tonnes to India in February."

Meanwhile gold market has remained under pressure because of a possibility of an end to zero interest rate policy by the US as its Federal Reserve is slated to meet later today.