Govt scraps 80:20 rule for gold imports in bid to check smuggling
29 Nov 2014
The government has decided to withdraw the 20:80 scheme and its allied restrictions on import of gold and, accordingly, all instructions issued about the scheme from time to time stand withdrawn with immediate effect, the Reserve Bank of India (RBI) said on Friday.
"It has been decided by the government of India to withdraw the 20:80 scheme and restrictions placed on import of gold," RBI stated in a release late on Friday, without giving a reason for the change in the rule.
The move is intended to check the rising illegal shipments into the world's second-biggest market for the metal after China.
Import of gold in the form of coins and medallions is now prohibited.
As per the 80:20 rule, all nominated banks / nominated agencies and other entities have to ensure that at least one fifth, ie, 20 per cent, of every lot of import of gold imported to the country is exclusively made available for the purpose of exports.
This will be monitored by customs authorities, and will be implemented port-wise only.
Further, the rule required that such gold is made available for domestic use only to the entities engaged in jewellery business / bullion dealers and to banks authorised to administer the Gold Deposit Scheme against full upfront payment. In other words, supply of gold in any form to the domestic users other than against full payment upfront was not permitted.
The 80:20 rule along with a record duty of 10 per cent imposed by the government last year to bring down soaring shipments and narrow the current account deficit that had hit a record, had helped reduce legal imports of the precious metal but it encouraged smuggling.
While the government's latest move may not help curb gold imports, it would be a welcome relief to jewellers facing difficulties in sourcing gold during the key festival and wedding season that started in October.
India's gold imports are expected to climb to around 100 tonnes for a third straight month in November as dealers bought heavily on fears of curbs on overseas purchases, especially as the wedding season picks up.