Raiding RBI war chest, asking people to deposit gold needless distractions

Using the central bank's gold to raise resources is no substitute for bolstering the sovereign's credibility with investors

Even if it proves to be a blip, this week’s volatility in gold may have its uses. For one thing, Tuesday’s steepest single-day price decline in seven years should make bankers in India wary of storing up future trouble by writing risky subprime loans against the country’s most-loved commodity.

Gold has a strong emotive appeal to Indians, who own one-eighth of the metal ever mined. Of late, though, the glitter was beginning to blind the authorities, too. India’s central bank recently raised the loan-to-value limit for advances against gold jewelry to 90% from 75%.

Now that the international price has