After last week's new Reserve Bank of India (RBI) policy on gold, the metal's import has stopped as the new norms have created confusion. "RBI is expected to clarify soon," an industry source said.
While linking gold import to exports, the central bank had reopened the conventional route. Last week, it declared that 20 per cent of all gold imports should be for providing to exporters. However, it also had removed all restriction on import through the consignment route and also removed the condition of 100 per cent cash margin for import against letter of credit. This was expected to increase import in the near term, while the linkage with exports was supposed to limit import in the medium term.
The result has been confusion. Who, jewellers ask, is to ensure the export part, the importing jeweller or an importing agency? For, the demand segments are different. Nor are importing agencies sure. Premier trading houses were told they cannot import gold for the domestic market, despite having a licence to do so. India's export of gold was around 50 tonnes last year. Which means the new policy will only allow import of 200 tonnes - this is a third of domestic demand. An analyst said linkage of import with export would mean round tripping (in effect, a barter between companies of unused assets to get around the rule) or export without much value addition. That was the only way by which domestic demand could have been met.
However, banks were confused about who was to monitor if the gold sold to exporters was shipped out or not, as RBI was silent on this. Importers were told part of the consigment was to be kept in a bonded warehouse and could be taken back only after gold meant for export got actually shipped. However, there aren't enough of such warehouses for this purpose.