The move is aimed at bridging the widening current account deficit
The Reserve Bank of India (RBI), on Monday, imposed restrictions on banks to import gold with immediate effect to curb the widening current account deficit (CAD).
“To moderate the demand for gold for domestic use, it has been decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewellery,” RBI said in a notification.
The Working Group on Gold, under the chairmanship of K. U. B. Rao, had recommended aligning gold import regulations with rest of the imports for creating a level-playing field between gold imports and other imports.
“Bulk of the gold imported by nominated banks is on consignment basis whereby nominated banks do not have to fund these stocks,” said the RBI.
Nominated banks and agencies were permitted to import gold on loan basis, suppliers’ credit / buyers’ credit basis, consignment basis as also on unfixed price basis.
The widening CAD is a worry for the government as well as for the central bank. It reached a record high of 6.7 per cent of gross domestic product (GDP) in the October-December quarter on the back of rising oil and gold imports.
In the last monetary policy announcement, the RBI had stated that it would restrict the import of gold on consignment basis by banks only to meet the genuine needs of exporters of gold jewellery.