Banks should be allowed to buy back the gold coins they sell to their individual customers, according to State Bank of India Chairman Pratip Chaudhuri.

Pointing out that there is good demand for gold coins, the SBI chief said permitting banks to buy back will create liquidity in the precious metal, thereby easing pressure on the import front.

The current RBI guidelines do not permit buy back of gold coins/bars by banks. In a study on India’s gold rush, industry body Assocham said the country imports most of its gold requirement, accounting for nearly a third of the global demand. Gold as a commodity on its own does not add much to the productive capacity of the economy.

Moreover, gold imports reduce the availability of foreign exchange reserves to finance the import of other commodities. Such high value of gold imports has now started hurting India’s current account position, said Assocham.

(This article was published on November 25, 2012)
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