RBI views decision to scrap 80:20 gold import rule as 'reasonable'

NEW DELHI (Scrap Monster): The Reserve Bank of India (RBI) today stated that the government’s decision to abolish the controversial 80:20 rule on gold imports was quite ‘reasonable’. RBI Governor Raghuram Rajan said the government has come up with the decision at probably the best time. He further said that the government in all likelihood may review the import duty on gold which are currently at 10%.

 

The RBI Governor while presenting the monetary policy review on Tuesday stated that the bank is eagerly waiting to see how the government decision plays out in the forthcoming months. The central bank held the interest rates unchanged, but signaled of possible rate cuts early next year. According to Rajan, there are further requests in front of the government to lower the high duty structure on gold imports. The government may take its own good time to take its decision, he added.

 

The removal of 80:20 constraints may naturally increase gold inflow into the country. However, traders believe that importers had stocked adequately ahead of wedding season, in anticipation of further curbs on import. The stocks with Customs will also add to gold supply chain. Fresh imports are unlikely to happen until all these gold stocks are liquidated. Hence a sudden surge in gold imports is ruled out.

 

Any rise in gold imports may unsettle the trade balance situation. But falling crude prices is expected to provide enough cover. According to the government, the oil prices are likely to remain bearish in the medium term, which will help to keep the trade deficit under control even if gold import volumes surge in the upcoming months.