Concerned over a sharp jump in gold imports,the government on Monday warned of further corrective measures that could include a ban on sale of gold coins by banks and prohibition on import of the precious metal for trading.
Stating that the country could not afford such high levels of gold imports,finance minister P Chidambaram said there may be a review of the import policy. For May,the import of gold was 162 tonnes, he said after a meeting of the Financial Stability Development Council (FSDC).
The review could include measures such as barring banks from selling gold coins. More steps will have to be taken to reduce gold imports. Export import policy on gold will have to be reviewed. We may consider banning gold coin sales by banks, said Arvind Mayaram,secretary,department of economic affairs. Later in the day,commerce and industry minister Anand Sharma also met Chidambaram to discuss the issue. We have serious concerns. We cant allow a situation where gold (imports) in the last two months have reached a stage where it is causing huge stress, he said after the meeting,adding that there will be more corrective measures.
Banks have taken corrective measures. And I am going to review it. And we will ensure that only for actual users gold is imported not for trading purposes. Except gems and jewellery and the gold refinery…,I dont think it should be allowed for trading, he said.
India is the largest consumer of gold and imports of the yellow metal is the second largest item in the countrys import bill and directly impact the burgeoning current account deficit.
Gold and silver imports during April,2013 jumped by 138 per cent to $7.5 billion against $3.1 billion a year ago,taking the countrys trade deficit to $17.8 billion. In 2012-13,gold imports stood at around 830 tonnes.
Concerned by the high current account deficit that touched a record 6.7 per cent of the GDP in the third quarter of last fiscal,the government has taken a number of measures to curb gold imports. These include hiking the import duty on the yellow metal to 6 per cent as well as introduction of inflation indexed bonds that would provide a hedge against prices to investors..
Last month,the Reserve Bank of India had imposed curbs on import of the yellow metal by banks. Besides,it has also put restrictions on banks and NBFCs for providing loans against gold coins as well as units of gold ETFs.
Pressure on CAD
For May, import of gold was 162 tonnes,says finance minister P Chidambaram
Measures such as barring banks from selling gold coins might be implemented