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Central Bank Likely to Impose Curbs on Gold Coin
Sale
By Manojit Saha
Business Standard, New Delhi
Wednesday, June 27, 2012
http://business-standard.com/india/news/central-bank-likely-to-impose-cu...
MUMBAI -- The Reserve Bank of India is likely to
clamp down on gold coin sales by banks, amid rising bullion imports adding
pressure to the current account deficit and weakening the rupee.
The Banking Regulation Act does not allow banks to
trade in commodities and they play the role of a financial intermediary. This
norm was relaxed in the pre-2008 era when the country saw a dollar influx
that resulted in a sharp appreciation of the rupee. To sterilise
dollar inflows, banks were allowed to sell gold, as they imported the yellow
metal. The measure was temporary.
"Banks were allowed to sell gold by importing
it to fight the excess dollar flows. By the same logic, the measure should be
reversed now as we are at the opposite end of the spectrum. It was a
temporary measure, which unfortunately was made permanent by banks," a
top RBI official said.
The rupee has depreciated 30 per cent since August amid the sovereign debt crisis
in the euro zone, which made investors flee to safer havens. Weakening
macroeconomic fundamentals like the fiscal and the current account deficit
have resulted in investors pulling out from the Indian market.
In its recent interactions with bankers, the central
bank sounded its discomfort over the practice of banks pushing gold coin
sales and asked them to go slow. However, banks have not stopped the practice
of incentivising their staff to push gold sales, as
they earn a margin of Rs 100-150 per gramme of gold sold.
Gold and silver imports were around $61.5 billion as
of March-end -- a growth of 44.4 per cent during 2011-12 as against 43.5 per
cent in 2010-11. In 2011 India imported 969 tonnes
of the yellow metal compared to 958 tonnes in the
previous year, according to data compiled by the World Gold Council. In value
terms, imports in 201-12 were around $60 billion. However, according to data
released by the government, gold and silver imports in April and May 2012
came down sharply to $4.3 billion, compared to $9.2 billion last year.
RBI Governor D Subbarao
had said earlier that the central bank was looking into the issue of rising
gold imports and formed a committee headed by an executive director-rank
officer to examine the reasons.
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