By Priya Nair
Reliance Capital said on Friday it had suspended gold sales to support government efforts to curb imports of the precious metal, one of the main drivers of the country's record high current account deficit.
The company, controlled by billionaire Anil Ambani, said it has suspended gold sales in physical form and as an investment product, and also halted financing using gold as a security. It also suspended new subscriptions in its gold savings fund, but said existing investors would not be affected by the decision.
CEO Sam Ghosh said in a statement that he hoped that all involved in the gold trade would help curb imports that have "placed an unbearable burden on the current account deficit and are severely hurting the country's growth prospects."
Gold is India's second-biggest import after oil.
Spot gold fell to the lowest since September 2010 on Friday at $1,296.59 an ounce. Physical buying from China and India has been one of the bright spots for the metal since it lost its safe haven appeal this year, as the U.S. Federal Reserve began to look at scaling back its bullion-supporting money policy.
On June 5, India's federal government hiked the import duty on gold to 8 percent from 6 percent, following a ban on consignment imports. Reliance Capital used to import most of its gold through banks. It was not immediately clear how much of India's total gold imports were accounted for by the company.
Gold imports into India fell from an average of $135 million per day in the first half of May to $36 million in the second half, Finance Minister P. Chidambaram said. India has ruled out a blanket ban on gold imports.
Reliance Gold Savings Fund had 22.71 billion rupees under management as of March 31, according to data from the Association of Mutual Funds in India. The company sold 5 tonnes of gold coins in fiscal 2013, according to the company's website.
India imported 162 tonnes of gold in May, at least twice its normal monthly average, the finance ministry said on June 4.
India has for centuries relied on gold for savings, dowries and as a display of wealth. As banks have made few inroads into rural areas and consumer inflation is high, it remains the investment of choice for many.