In recent weeks, the premium on gold, the difference between domestic and international gold prices, had shot up to as high as $40 an once from less than $2 an ounce due to supply disruptions in the market following the RBI directive on banks.
MUMBAI: The restriction on import of gold are likely to be extended to gold import houses, also known as premier trading houses, sources in the central bank have said.
In the annual policy review, earlier this month, the Reserve Bank of India had imposed restriction on import of the yellow metal by banks to rein in current account deficit.
The central banks had said gold import by banks will only be restricted to consignment basis to meet genuine needs of exporters.
However, the restriction were not applicable to gold import houses, which like banks also import gold. This had opened a huge revenue opportunity for them, as they had charging hefty premium for selling gold to retailers.
“We are in talks with the commerce ministry to extend the restriction to gold import firms," a top central bank official said.
Bankers said the objective behind putting restriction on gold imports was not being met, as nominated agencies, other than banks, were kept out of the revised norms.
In recent weeks, the premium on gold, the difference between domestic and international gold prices, had shot up to as high as $40 an once from less than $2 an ounce due to supply disruptions in the market following the RBI directive on banks.
This had opened a huge money making opportunity for gold import houses. Banks had also altered central bank about this anomaly and had requested them to address the issue.
Currently, banks are permitted to import gold on consignment basis, unfixed price basis and on loan basis but only for the purpose of export and not domestic use.
Apart from banks, gold is also imported directly by export oriented units and units in Special Economic Zones (SEZs) in the gems and jewellery sector and nominated agencies.
The bulk of the gold imported by nominated banks is, however, on consignment basis whereby the nominated banks do not have to fund these stocks.
Import of the yellow metal has been a huge concern for both the government and central bank which is resulting in widening the current account deficit. Current account deficit soared to a record high of 6.7% of GDP in quarter ended December 2012.
However, finance minister P Chidambaram had said that CAD is likely to come down to "more tolerable and acceptable" levels in 2012-13 once the fourth quarter numbers are out. A current account deficit of 2.5% is seen as a comfort level of RBI.
Courtesy: Business Standard
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