RBI panel suggests limits on gold import by banks, agencies

Written By Unknown on Rabu, 06 Februari 2013 | 23.25

Concerned over rising gold imports, a RBI committee today suggested limits on imports of gold by banks and other government agencies like MMTC and STC, which account for about 56 per cent of the total import of the precious metal.

"Setting value or quantum limits for canalising agencies and banks to import gold can also reduce the demand for gold. Such limits can be reviewed periodically," said a report of RBI's working group on gold loans. The report also suggested that government could consider removing such restrictions once the Current Account Deficit (CAD) comes down to sustainable level.

The CAD, which is the difference between inflow and outflow of foreign currency, touched a record high of 5.4 per cent in the July-September quarter.

Gold imports in the April-December period stood at USD 38 billion. In 2011-12 fiscal it was USD 56.5 billion. Stating that choking supply channels cannot be an appropriate way to reduce the demand unless under compelling circumstances, it said: "We need to address the excessive demand issue... Limits on imports by canalising agencies and banks can reduce the demand for gold purely as an emergency measure".

The proposal, RBI committee said should be read from the context of an extreme and dire need to reduce gold imports, when external stability is threatened. The canalising agencies like MMTC, STC and the nominated
banks, it said, play a major role in canalising gold imports into the country. These imports are largely for selling gold to jewellery manufacturers and at retail level.



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