RBI issues fresh gold import norms to curb trade deficit

The Reserve Bank of India imposed fresh constraints on gold imports late on Monday, as the authorities struggle to contain the current account deficit which has reached record highs. The new policy ensures that most of the gold imported into the country goes to jewellers and not speculators.

The RBI said that authorised gold importers, which include banks and gold-trading agencies like MMTC (Minerals & Metals Trading Corp) can now sell gold only to jewellers or bullion dealers who supply gold for the jewellery business.

The revision has been done in consultation with the government and will be applicable to gold imports in any form or level purity, including gold coins or unprocessed 'Dore' gold.

 This step will restrict the supply of gold in the domestic market, according to the Gems and Jewellery Export Promotion Council of India.

The gold importing agencies will also have to ensure that 20 per cent of every lot of gold imported is used only for purposes of export, the RBI said in its notification.

India's current-account deficit for the financial year ended March 31 stood at $87.8 billion, or 4.8 per cent of India's gross domestic product, against $78.2 billion, or 4.2 per cent of GDP, in the previous year, according to RBI data.

RBI had imposed certain restrictions on import of gold in various forms earlier, too. Those were applicable on nominated banks, agencies, 'premier' and 'star' trading houses, units in special economic zones (SEZs) and export-oriented units, which were permitted to import gold.

The central bank has now said any import of gold under any type of scheme would follow the 20-80 principle. The present instructions on import of gold on a consignment basis and the letter-of-credit restrictions stand withdrawn.

Under the new norms, an entity importing 100 kg of gold (which will have to be kept in bonded warehouse) will have to release 20 kg to exporters of gold or gold jewellery) against an undertaking to customs authorities.

Such entities would be permitted by the customs to make fresh imports only to the extent of actual exports out of the 20 kg of gold held in the bonded warehouse. For instance, it will be permitted to undertake fresh imports only after at least 15 kg of this 20 kg has been exported.

The latest move is expected to lead to higher domestic prices, say experts.

The RBI also said the government would issue separate instructions, if needed, to the Customs authorities and the Directorate General of Foreign Trade to operate and monitor these import restrictions.

The latest scheme follows exporters' meeting last month with Commerce Minister Anand Sharma. They had complained that banks were not importing gold for exporters and that jewellery exports were suffering due to low gold availability.