RBI announces major changes to gold import and gold loans

The Reserve Bank of India on Wednesday (February 18th 2015)  allowed nominated banks to provide gold on loan to jewellers.
The central bank also said there would be no restriction on import of gold coins, although commercial banks will still not be allowed to sell these in the home market. This was made available in a late evening notification which was issued to clarify the status of gold import after removal of the 80:20 scheme in end-November,

The impact was visible in the trading world as Jewellers and associated firms are bound to gain from the new policy announcement made by RBI.

Nominated banks for gold import would now be able to import gold, the precious yellow metal on consignment bases. Meaning, they can import and pay once they actually sell the gold and realise the payment. Banks can also provide gold on loan to jewellers.

This opens the gold import route further and addresses the liquidity crunch of jewellers, who were made to pay the full amount for buying gold since mid-2013. RBI has said sale of gold to jewellers will have to be against full payment only. Jewellers will, however, prefer to take it on loan rather than purchasing outright. Banks were importing much less gold since removal of the 80:20 scheme in end-November.

In another important clarification, RBI has allowed star and premium trading houses or status holder export houses to import gold without end-use restrictions. This means, said an analyst, that they will be able to import  by making full payment and can hold or even use that for trading. Regarding the export obligation prior to removal of 80:20, RBI has clarified, “The obligation will continue to apply in respect of unutilised gold imported before November 28, 2014, the date of abolition of the scheme.”  Since June 1, 2014, star and premier trading houses were importing almost 60-70 per cent of total imports.
RBI has also clarified that, “import of gold coins and medallions will no longer be prohibited.”  However, pending further review, the restrictions on banks in selling gold coins and medallions are not being removed.

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