Allowing banks to buy back gold coins will result in a win-win situation for all stakeholders, feel bankers.

A panel constituted by the Reserve Bank of India to suggest measures to manage gold demand recommended that banks be allowed to buy back gold coins, which is not permitted now.

“This is a good idea,” said M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad. From a customer’s point of view, this would improve liquidity of the commodity, he added.

From a bank’s perspective, it can better manage the cost-structures if buyback is allowed, Subhalakshmi Panse, Managing Director of Allahabad Bank, said.

“Banks have been requesting this for long.

“Now we are importing gold and selling it without being allowed to buy it back. But any traction should be two-sided,” she said. As gold is seen as a form of investment, the customers should also have a facility to offload when needed, Panse said.

Further, buyback will help banks improve their revenue by reselling the coins.

“There has been big demand for gold coins in general. Last year, we sold 150 kg.

“In the first three quarters of the current fiscal, 135 kg of gold coins have been sold by SBH,” Bhagavantha Rao said.

The RBI panel is of the opinion that buyback of coins might help recycle the domestically available gold which is estimated at 18,000-20,000 tonnes.

(This article was published on February 7, 2013)
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