Lack of clarity in RBI rules makes importers wary
Gold imports have come to a halt after the Reserve Bank of India linked shipments into the country with exports on July 22, trade participants told an industry meet here.
The RBI, in its circular, said that 20 per cent of an imported consignment should exclusively be made available to exporters.
It also said that an exporter could get gold from nominated agencies, including banks, based on their purchases in the last three years. The highest quantity that an exporter bought in the last three years will be the maximum amount permitted but, RBI said, all the requirement cannot be imported at one go.
It also said purchase of more than two months’ demand would be deemed unusual. The rule also applies for import of semi-purified gold bar called dore.
RBI came up with the rule to curb gold imports as part of measures to tackle the rising current account deficit, led by higher imports.
“The problem for us is that the Customs authorities are unsure of how to implement the RBI rule. Therefore, no import is taking place,” said Prithivarj Kothari, Director, RiddiSiddhi Bullions Ltd.
According to Ashok Minawala, former chairman of All India Gems and Jewellery Trade Federation, the problem could get more serious once an imported consignment arrives.
“Everything has to be kept in the bonded warehouses separately. Who will monitor this and how? These are questions that have to be answered,” he said.
“No nominated agency wants to import when the picture is unclear. So, not a single gram of gold has come into the country in the last three weeks,” said Vinod Hyagriv, an office-bearer of the trade federation.
Currently, jewellers are managing with whatever stocks they have besides using scrap gold.
“We have told the Government about the problem. A notification that will give clarity to the whole issue is likely this week,” said Kothari.
At the India International Gold Convention, traders voiced their protest against curbing of gold imports.
“Our trade comes under the purview of the Commerce Ministry. But these measures have put us under the Finance Ministry’s control,” lamented a trader, who did not wish to be identified.
According to Gerhard Max Schubert, Head of Commodities Wealth Management, Emirates NBD, the whole problem of the current account deficit has cropped up since the RBI and the Government were not treating gold as money on hand.
“Gold imports are nothing but money coming into the country. Why aren’t things looked at that way?” he asked.
“The Indian gold industry has been forced to contend with many things since the beginning of this year. The problem is multiple adjustments are affecting the market,” said Davin Gornall, Chairman of The London Bullion Market Association.
Most of those who attended the convention felt that these measures could lead to increased smuggling.
Imports and exports are two different things and “the Government has erred in combining both,” said S.K. Jindal, Vice-President of Delhi Bullion Association.
In a poll conducted among the participants at the convention, nearly 60 per cent of the 137 who took part in the exercise felt that over 300 tonnes of gold could be smuggled into the country this year.
Asked about this, Hyagriv said: “This is the trade’s view. It is for the Government to tackle it.”
(The correspondent’s trip for this convention was sponsored by the India International Gold Convention)