RBI allows more banks to import gold

The Reserve Bank of India (RBI) has allowed more banks, including Axis Bank and Kotak Mahindra Bank, to import gold under the 80:20 scheme, a move seen as a precursor to easing restrictions on inward shipments of the metal.

The government and the RBI had imposed tough measures to control gold imports, one of the primary causes of the current account deficit swelling to a record high $88.2 billion in 2012-13.

The government also increased customs duty on gold to 10 per cent from 4 per cent to discourage imports.

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According to sources, the RBI has permitted Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank to import gold. These banks received permission to import gold under the 80:20 scheme from the RBI some time ago, sources said.

Under the 80:20 scheme introduced on August 14, nominated agencies could import gold on condition that 20 per cent of the shipment would be exported and the remainder kept for domestic use. Permission for subsequent imports would be given on fulfilment of the export obligation.

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So far, only six banks and three financial institutions were allowed to import gold under the 80:20 scheme. On a consignment basis, 21 banks, as permitted by the RBI, can import gold and silver.

Gold imports have fallen substantially after the restrictions. Gold and silver imports declined 71.4 per cent to $1.63 billion in February. Imports of gold and silver in February 2013 stood at $5.24 billion. In January this year, they were $1.72 billion.

India is the largest importer of gold, which is mainly utilised to meet the demand of the jewellery industry. Imports stood at about 830 tonnes in 2012-13.

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Faced with intense pressure to relax gold import curbs, the government had said it would review the decision after getting final figures of the current account deficit (CAD).

"We will revisit the import duty on gold only after the CAD figures become clear for the end of the year. Let's see what the CAD figures are," Finance Minister P Chidambaram had said earlier this month.

The CAD in the current financial year is expected to narrow to $50 billion.