RBI acts as gold continues to pump up current account deficit

The Reserve Bank of India (RBI) has restricted all imports of gold by banks on consignment basis to those required to meet the genuine needs of exporters of gold jewellery, after gold imports to the country surged over 72 per cent to $7.5 billion in April 2013.

A Reserve Bank of India Working Group on Gold headed by K U B Rao had recommended aligning gold import regulations with rest of the imports for creating a level playing field between gold imports and other imports.

''Bulk of the gold imported by nominated banks is on consignment basis whereby nominated banks do not have to fund these stocks. To moderate the demand for gold for domestic use, it has been decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewellery,'' RBI said in a notification issued today.

The above instructions will come into force with immediate effect. ADs may bring the contents of this circular to the notice of their constituents and customers concerned, it added.

India's trade deficit widened nearly 27 per cent amidst rising sale of gold in the domestic market following a small drop in the international prices of the precious metal.

Imports of gold and silver into the country have shot up 138 per cent year-on-year to $7.5 billion in April as customers took advantage of a 17 per cent fall in global prices and some easing of domestic inflation.

Traders took advantage of the small dent in overseas prices to stock up gold for sales during auspicious days and for the coming festival season, increasing pressure on the current account balance and limiting the space for monetary easing by the RBI.

State-run banks and the India Post also joined the push the auspicious `Akshya Trithiya' gold sales offering discounts and other attractive packages.

India Post is offering a 7.5 per cent discount in the price of gold coins it sells on the Akshyay Tritiya day.

On the eve of Akshyay Tritiya (also known as Akha Teej) which is falling this year on 13 May 2013, India Post has announced a 'discount of 7.5 per cent to all categories of customers on purchase of India Post gold coins of any denominations from the designated Post Offices across Delhi.

The Department of Posts has been selling internationally branded gold coins of 24 carat with 99.99 per cent purity, with quality packaging, produced by Valcambi, Switzerland in association with World Gold Council and Reliance Money Infrastructure Limited in the denominations of 0.5 g, 1 g, 5 g, 8 g, 10 g, 20 g and 50 g to suit the purchaser/public.  Thirty post offices, including all the 12 head post offices in Delhi are selling gold coins across Delhi.

India's trade deficit stood at 17.8 billion in April amidst an over 72 per cent rise in gold imports, official data showed.

The up tick in gold imports comes after the government lifted some curbs on gold imports in the wake of an easing of international prices of the precious metal. The rising imports into India, the world's largest importer of gold, also helped prices to recover somewhat.

"The rise in gold imports is surprising. It was not expected," commerce secretary S R Rao said.