Restriction on co-op banks for loan against gold coins

Restriction on co-op banks for loan against gold coins

The Reserve Bank of India (RBI) extended the restriction on advance against gold on co-operative banks as well, a move aimed at curbing demand for gold.

In a notification, the RBI said that while granting advance against the security of specially minted gold coins sold by banks, state/central co-operative banks “should ensure that the weight of the coin(s) does not exceed 50 gram per customer”.

Also the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 gm) should be within the Board approved limit, it added.

Earlier, similar restrictions were imposed on commercial banks.

The RBI’s latest move comes in the backdrop of government raising import duty on gold to 8 per cent from 6 per cent.

The central bank has also advised banks not to sell gold coins, Finance Minister P Chidambaram had said on Thursday.

Surge in gold imports has become a cause of concern for both the government as well as the RBI as it putting pressure on the current account deficit, which is likely to be around 5 per cent of the GDP in 2012-13.

In the first two months of the current fiscal there has been significant spurt in gold imports as the average foreign buy of the precious metal stood at 152 tonnes in April and May. The monthly average import in 2012-13 was 70 tonnes. The increase in gold import is attributed to the slump in its prices in the international market.

Gold smuggling set to rise

The hike in import duty from 6 to 8 per cent could lead to a spurt in smuggling gold from 200 tonnes in calendar year 2012 by almost 50 per cent. The former chairman of All India Gems & Jewellery Trade Federation (GJF), Bachhraj Bamalwa said, “According to industry estimates this year (smuggling of gold) may rise to 300 tonne, which is 30 per cent of the total imports." Gold imports by India, the world’s largest consumer, stood at about 860 tonnes in 2012.

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