The Reserve Bank of India (RBI) does not want to prohibit banks from selling gold coins so as to encourage genuine investment, but is not in favour of speculative buying or aggressive marketing by banks, D Subbarao, Governor has said.

On Monday, the RBI had said that banks will not be permitted to give loans against gold exchange-traded funds (ETFs) and gold mutual funds.

“If people want to buy gold for savings, the route should be available for them but for genuine purpose. But if the loan to value ratio is not restrained, there is a possible risk,” he said.

Speaking on the sidelines of a meeting at the College of Agricultural Banking here, Subbarao said that he recognised that the attractiveness of gold was a consequence of high inflation, but pointed out the need to invest in financial savings which is good for the economy.

According to reports, the central bank is examining the business practices of 30 banks to ascertain whether bank staff was under pressure form senior officers to sell gold coins or related products, and to find whether they are being sold as a pre-requisite for offering regular banking services.

(This article was published on May 28, 2013)
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