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The Reserve Bank has allowed five domestic private banks to import gold. Sector officials said this could be a significant step towards easing of tough curbs on the metal imposed last year to cut the country's trade deficit.
The move could boost supplies and bring down premiums in the world's second-biggest consumer after China.
The central bank has allowed imports by HDFC Bank , Axis Bank, Kotak Mahindra Bank, IndusInd Bank and YES Bank, officials at the respective banks told Reuters.
Two sector sources confirmed the names of the banks.
The government had enforced an 80/20 rule in July, making it mandatory to export a fifth of all gold imports. Under that, only six banks and three state-run trading agencies that had facilitated export of gold or jewellery in three years were allowed to import. The six banks were mostly state-run lenders. The central bank has permitted imports within prescribed limits by the private banks, though they had not facilitated any exports of metal or jewellery in three years.
"They have decided on limits on quantities depending on the number of (current) customers you have for exports," said Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank. The Reserve Bank did not immediately respond to a request for comment.
The move to allow more banks to import gold may raise shipments to 40 tonnes a month from more than 20 in February, sector officials said. India used to ship in 70 tonnes a month, the biggest import after oil that had pushed the current account deficit to a record in the year ended March 2013.
"Supplies will be smooth from now and I think premiums will come down," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation. "This looks like just a beginning to the further easing of 80/20 rule."
NEW GOVERNMENT, NEW RULES
India used to be the No. 1 buyer of gold before the levy of a record 10 percent import tax in stages and other restrictions led to a sharp cut. Premiums hit a record of $160 an ounce in December, triggering smuggling and forcing industry officials to call for a repeal of the curbs.
Further major relaxations of the curbs are likely only after a new government is formed around June, officials involved with policymaking said. Finance Minister P. Chidambaram said earlier this month the gold import duty could be revisited only after the final CAD numbers are out. The CAD, final figures for which are expected to come in the first week of June, is likely to fall to less than $40 billion for the fiscal year ending March 31 from its record $88 billion in the previous year. By that time it will also be clear who will form the government, after India's general elections that start in April.
The main opposition Bharatiya Janata Party - the favourite to win the polls - has already spoken against the gold import restrictions. Its prime ministerial candidate Narendra Modi has said that any action on gold should look at the interests of the public and traders, not just economics and policy. A senior policy official aware of the deliberations said the government and the central bank wanted to gradually remove the curbs as falling gold prices are expected to cut the CAD by $10-$12 billion. "We don't believe in artificial kind of compression of current account deficit," the official said. "Since it was an extraordinary kind of situation and it was a policy option available, we tried that." The official estimates India's gold imports this fiscal year to be around 800-850 tonnes, lower than last year's 950 tonnes.
