The Reserve Bank of India's (RBI) decision to curb gold bullion imports by banks is aimed at cutting such shipments into the country by at least 10 per cent. Gold import was 1,015 tonnes in 2012-13 and nearly 70 per cent of this was by this method.
Under such imports, banks make the payment to the foreign seller when they sell the gold in India; till then, no money moves out. As banks do not have to fund such imports before they are sold, such imports ran ahead of the demand, says RBI. Anticipating higher demand for Akshaya Tritiya next week, a lot of imports have taken place on this basis; in April, these crossed 100 tonnes.
Import by this route will be allowed to meet the genuine needs of jewellery exporters. Gold demand for domestic use will be routed through banks but by placing orders and paying margins.
Suvanker Sen, executive director of Senco Gold Ltd, a leading eastern Indian jewellery retail chain, said: "RBI's proposal will lead to lower supply of gold and while demand for jewellery will not be affected, there is possibility of investment demand getting affected."
A veteran bullion analyst said in 2012-13, about 230 tonnes of gold jewellery was exported, including round tripping, meaning export in the form of crude jewellery.
Last month, the Prime Minister's Economic Advisory Council said gold imports had moderated in 2012-13 and after the recent fall in prices, was likely to reduce further. The Council wanted more restrictions to ensure these did not cross $40 billion (it was $50 bn in the first 11 months of 2012-13).
The jewellery trade is unhappy. "Jewellers will find it difficult to get gold," said Bachhraj Bamalwa, former chairman, All India Gems & Jewellery Trade Federation. Fewer banks would remain in the business and, hence, would start charging more, he said. Banks used to charge $2 an ounce of premium for selling gold but these have, in the past month, risen to $12. "If these premiums increase further, there will be enough incentive for smuggling in gold, as the import duty is six per cent and one per cent VAT (value added tax) is already applicable," he said.
The trade says smaller jewellers would also be affected, as their orders would be of a few kilos and they would have to place margin money before giving the order through a bank. Banks will also wait to club orders, as a few kilos of import would not be viable. "This will increase the cost and waiting period for small jewellers," explained an official with a large gold jewellery retail chain.