RBI’s fresh salvo on gold: Export 20% of imported stock

Move aimed to bring CAD down and boost the falling rupee

Written by ENS Economic Bureau | Mumbai | Published: July 23, 2013 2:47 am

The Reserve Bank of India (RBI) on Monday decided to tighten gold imports in a fresh attempt to bring current account deficit (CAD) down and in turn boost the falling rupee.

The central bank has directed nominated agencies to ensure that at least one-fifth of every lot of import of gold — in any form or purity including import of gold coins/dore — is exclusively made available for the purpose of export.

Rationalising the import of gold into the country,the RBI has further said importers should make available gold in any form for domestic use only to entities engaged in jewellery business and bullion dealers supplying gold to jewellers. The RBI notification issued on Monday has asked nominated banks and agencies to ensure that they comply with these instructions while effecting the foreign exchange transactions put through by their clients. “The instructions will,however,not apply to import of gold by units in the SEZ/ EOUs / star trading houses who would import gold only for the purpose of exports,” it added.

Importers will be required to retain 20 per cent of the imported quantity in the customs bonded warehouses,the RBI said. They are permitted to undertake fresh imports of gold only after the exports have taken place to the extent of at least 75 per cent of gold remaining in the customs bonded warehouse,the central bank said in a measure aimed at pulling down demand and strengthening the rupee.

According to Gems and Jewellery Export Promotion Council Chairman Vipul Shah,the latest RBI step will boost export and foreign revenue. “There will not be any shortage of gold for domestic use and there will be some impact on prices. Only 7 per cent of the imported gold was exported. The RBI move will bring down imports significantly and boost exports,” Shah said.

The RBI measure will lead to a rise in gold prices for both jewellery makers and consumers,former president of the Bombay Bullion Association,Suresh Hundia,said.

The government and the RBI have been taking steps to reduce gold imports,the second major foreign exchange outflow after crude oil. High import of the metal had widened India’s CAD,which hit a record high of 6.7 per cent of GDP in the third quarter of 2012-13. Gold imports into India stood at around 830 tonnes in 2012-13. Imports hit a record 162 tonnes in May 2013 as Indians started accumulating gold to take advantage of hefty price falls,rattling the government and the central bank which are keen to rein in a current account deficit which hit an all-time high of 4.8 per cent in 2012-13.

Export proceeds repatriation period cut to 9 months

MUMBAI: In order to boost the foreign exchange reserves,the Reserve Bank on Monday brought down the period of realisation and repatriation for exporters of goods and software to 9 months from earlier 12 months. In November 2012,the RBI had increased the time limit to bring in export earnings to 12 months from six months,in view of global slowdown.

Option open for a sovereign bond issue: FinMin

New Delhi: With rupee continuing to be a worrying factor,the government on Monday said a sovereign bond issue was an option before it. “… all options are on the table and are examined from time to time. Steps are taken by the government at the appropriate time,” a finance ministry statement said. The rupee,meanwhile,fell by 37 paise to close at 59.72 on Monday following dollar demand from oil importers.

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