Gold import payments may be routed via banks

Reserve Bank of India (RBI) may make it mandatory to channel payments meant for gold imports through banks.

Though gold can be imported without a licence, there is a move by the Reserve Bank of India (RBI) to bring in the import quantity and payments under its indirect monitoring.

"It should not be construed that payments could be made directly to the counter-party as part of the liberalisation move," said sources.

Moreover, under the proposed guidelines, a bank will need to maintain adequate risk management procedures to counter the price risk arising from proprietary buying of gold on its own.

These guidelines will cover the purview of gold imported under various heads like consignment, buyer's credit or outright purchase.

Banks will also have to strictly adhere to "know your customer" rule so as to establish a credibility of the importer as any individual can import gold without a licence and this may lead to benami transactions, sources said.

Thereafter it would be the discretion of banks to allow the import through its own channel or route it through others.

Sources added that with the freeing of gold import, there are other ways available for making the import payments directly.

Hypothetically, payments could be made through counter-trade agreements whereby payments for gold imports could be adjusted with the sale of jewellery or import payments could be adjusted with export orders.

Under these routes, there will be no data available for the quantity of gold imported or payments made, sources said.

There is a need to make it clear that import payments are channeled through the banking sector not only for indirect supervision but for availability of data for balance of payment analysis, sources said.

In the recent exim policy, gold imports have been decanalised but bullion importers have been unable to take advantage of the trade liberalisation as the RBI is yet to notify the guidelines.

Prior to the exim policy announcements, the gold importers had to route their import orders through 19 designated agents.

Banking sources believe that with imports being liberalised, the demand-supply gap in the bullion market can be bridged to a large extent, thereby moderating the gold prices in the domestic market.