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The latest move by the Reserve Bank of India (RBI) to extend gold import on consignment basis norm from banks to all nominated agencies, is unlikely to affect overall gold availability in India, experts feel.
In order to restrict gold import to curb burgeoning current account deficit (CAD), the RBI on Tuesday extended the norm on import of gold on consignment basis from banks to all nominated agencies/star trading houses who have been permitted by the government to import gold.
Accordingly, any import of gold on consignment basis by both nominated agencies and banks shall now be permissible only to meet the needs of exporters of gold jewellery.
Also, the RBI further mandated all letters of credit (LCs) to be opened by nominated banks / agencies for import of gold under all categories will be only on 100% cash margin basis.
Earlier, a credit limit was offered to nominated agencies/star trading houses to obtain LCs. But, the delivery of gold was done only on 100% cash payment. Thus, importers used to get 3-7 days time for funds arrangement. Instead, they would have to pay 100% cash upfront.
“This would make gold import tougher with those with full cash would be able to import the yellow metal. But, there would be no impact on gold availability overall,” said Bhargav Vaidya, a noted bullion analyst in Mumbai.
Further, all imports of gold will necessarily have to be on Documents against Payment (DP) basis. Accordingly, gold imports on Documents against Acceptance (DA) basis will not be permitted. These restrictions will however not apply to import of gold to meet the needs of exporters of gold jewellery.
RBI asked banks to follow the norms with immediate effect. “The RBI’s decision, however, in not in favour of the industry,” said Vaidya.
