RBI's easing of norms may lead to twofold increase in India's gold imports

NEW DELHI (Scrap Monster): The gold industry in India projects two consequences to Reserve Bank of India’s (RBI) decision to allow more private banks to import gold into the country. Firstly, the gold imports which has remained subdued since August last year following the tight curbs on imports of the yellow metal may increase twofold. Secondly, more banks importing gold can bring down the domestic gold prices.

Earlier, the RBI had announced its decision to allow five domestic private sector banks- HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank and Yes Bank to import gold. Before, only six nominated public sector banks and three state-run trading agencies enjoyed rights to import gold. The industry forecasts monthly gold shipments to almost double to 40 tons when compared with the imports of 20 tons during the month of February.

According to KC Chakrabarty, Former RBI Deputy Governer, more banks importing gold can bring down the prices. The presence of more players will result in healthy competition to import gold at lower prices. Gold imports at cheaper rates will in turn help to improve the Current Account Deficit (CAD) situation in the country.

The RBI’s move is assumed as the first step towards easing the tough regulatory restrictions on gold imports. Now that more banks are allowed to import gold, the gold supply crunch is likely to alleviate to a certain extent. The industry also expects that the RBI decision may bring down the high gold premiums in the country.

Author: Paul Ploumis