Liberalisation of gold import norms on cards

Liberalisation in gold import scheme is on cards. The central bank which placed restrictions on gold import first in May and made them stringent from July last year are likely to see some procedural simplifications in coming days. Reserve Bank of India which met gold importing banks including Bank of Nova Scotia and State Bank of India this Monday and sources indicate that some procedural simplification in gold import norms are on cards.

RBI from its side can make some announcements, however customs procedures which are also being liberalised will have to be done by ministry of finance. The file regarding this is being prepared for priority agenda of the finance ministry, said the official.

On the expectations of the import norms being liberalised, premium for gold in spot market has come down from $120 per ounce a fortnight ago to $80 today in Mumbai market.

Early this week, the RBI had called banks active in importing gold to discuss issues in imports as things were seen easing on the current account deficit front and stringent restrictions have resulted in jewellery business taking a hit apart from spot premium going through the roof making the yellow metal costlier. Restrictions on import along with 10% duty had resulted in huge smuggling which is estimated at 200 tonnes a year.

Gem and Jewellery trade federation official said that they had also discussed the need to relax gold import procedures to remove unnecessary hurdles. Following that, said the officials in the know, RBI called a meeting of bankers. The new norms are expected to clear hurdles retaining basic framework of 80:20 rule under which out of total import 20% gold will have to be exported.

The issues discussed in the bankers meeting with the reserve bank of india include simplification of banded warehouse norms as this facility in not available fully at all the centers transferring officially imported gold from one city's warehouse to another causes several hurdles. Even gold collected under gold deposit scheme run by the banks like the State Bank of India is said to be misused which needs to be regulated. Gold under such scheme is 8-10 tonnes and once that has been loaned by the banks, it has the permission to import gold to replenish the stock. However some borrowers are understood to have sold the gold soon after borrowing and hence need was felt to tighten the rule by saying that gold once borrowed can be re-deposited in at least a six months' time.

A suggestion was also made to fix a quota for banks for importing gold to ensure a few banks don't corner imports.