MUMBAI (Reuters) - India on Friday scrapped a rule mandating traders to export 20 percent of all gold imported into the country in a surprise move that could cut smuggling and raise legal shipments into the world's second-biggest consumer of the metal after China.
The so-called 80:20 import rule tying imports to exports was introduced last year to bring down inbound shipments and narrow the current account deficit that had hit a record.
"It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on import of gold," the Reserve Bank of India (RBI) said, without giving a reason for the change in the rule.
A policymaker associated with India's gold import policy said the government instructed the RBI at 1830 local time on Friday to urgently change the rule. A notification was posted on the central bank's website two hours later.
"We were not informed about the reason for scrapping this rule. The restrictions on who all can import who can't are still valid," said the policymaker, declining to be named as he is not authorised to talk to media.
Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, said the 80:20 rule was not only encouraging smuggling but it was also misused by many traders.
(Reporting by Neha Dasgupta, Devidutta Tripathy and Suvashree Dey Chaudhury and Meenakshi Sharma; Editing by Sumeet Chatterjee and David Evans)