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RBI relaxation on gold imports to help increase official supplies: WGC

LiveMint logoLiveMint 22-05-2014 Dinesh Unnikrishnan

Mumbai: The World Gold Council (WGC) on Thursday said the decision by the Reserve Bank of India (RBI) to ease some gold import norms will help increase the supply of gold to the domestic market and could be part of a phased approach to remove curbs imposed last year to lower the current account deficit.

“This (RBI step) is expected to increase official supplies as a larger spectrum of players with an import entitlement now re-enter the market,” said Somasundaram P.R., managing director, India at WGC.

On Wednesday, RBI allowed star and premier trading houses, to import the yellow metal—a move that is expected to bring down prices of gold in the domestic market. Star trading houses are big gold importers, who typically import gold on loan on behalf of their clients or on a consignment basis.

Following the RBI curbs on gold imports last year, gold smuggling into the country has increased sharply. In 2013-14, the Central Board of Excise and Customs (CBEC) seized smuggled gold worth `564.8 crore, with the number of seizures at around 1,757, Mint reported on 7 May. In the corresponding period in 2012-13, it had seized gold worth `99 crore and the number of seizures was recorded at 871.

In February, the government acknowledged that there has been a rise in cases of gold smuggling due to an increase in the customs duty rate, but ruled out any immediate rollback in the measures announced to curb gold imports.

The continuation of the 80:20 scheme may still be a dampener, Somasundaram said. The scheme refers to the existing guidelines that say that importers can import gold only if 20% of the lot is exported.

Further, RBI’s decision to permit the nominated banks, to give gold metal loans (to domestic jewellery manufacturers out of the eligible domestic import quota of 80%, will also ease pressures facing jewellers in the past few months, Somasundaram said.

Experts said the relaxation in norms announced on Wednesday could result in some softening of domestic gold prices.

Gold dropped 2.24% to `27,904 per 10 grams at 2.38pm on the Multi Commodity Exchange of India Ltd. In the international market gold gained 0.2% to trade at $1294.59 per troy ounce. One troy ounce is 31.1 grams.

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