Author: Paul Ploumis20 Mar 2014 Last updated at 01:05:25 GMT

MUMBAI (Scrap Monster) : The Reserve Bank of India (RBI) has announced the decision to allow five domestic private sector banks to import gold as part of easing stringent rules of import. According to the latest report, RBI on behalf of the Govt. of India gave gold import permission to more banks including HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank and Yes Bank. The names of the banks were confirmed by two industry sources, but the bank officials declined to comment to media saying that they were not authorized to address the media on the matter.

According to industry officials, the grant of import permission is anticipated to increase shipments by around 40 tones per month from the 20 in February. The All India Gems and Jewellery Trade Federation expressed its pleasure regarding the news saying that this looks like a beginning step towards the more relaxing of the 80:20 rule.

The new move is assumed as a significant step towards relaxing the tough gold import rule imposed by the Govt. so as to curb the current account deficit of the country. India had inflicted several regulatory measures last year to keep gold import under control. Import duty of gold was raised thrice during 2013 from 2 % to 10 %. While declining gold import drastically, the regulations paved way for vast supply crunch in India, affecting the jewelry industry.

Now that more banks have been allowed to import gold in India, the supply crunch is expected to recover after which the premiums on gold may also be likely to be reduced. Due to gold import regulations in 2013, India which was the top gold consumer of the world was outturned by China which was enthroned in the first position.

Last year, India had enforced the 80:20 norms, according to which the 20 % of jewelry imported should be set aside for export. As per the rule, the Govt. had authorized only six banks and three state-run trading agencies to import gold. These banks and agencies had facilitated gold export for the past three years. However, the five private banks that have been endowed with gold import authority have not facilitated any export of gold in past years. According to the executive VC of Kotak Mahindra Bank, Govt. has considered the limits on quantities depending on the number of customers available for exports.