Allowing more banks to import gold will lead to lower cost: RBI
Allowing more banks to import gold will lead to lower cost that will in turn lead to improvement in India's current account deficit (CAD), according to Reserve bank of India (RBI) Deputy Governor K. C. Chakrabarty.
Earlier this week, the central bank allowed some private-sector lenders to import gold, a move that is being seen as a precursor to relaxation in restrictions on imports of the precious yellow metal.
Defending the decision to allow banks to import gold, Mr. Chakrabarty said, "If there is competition, gold will be imported at a lower cost. Whatever gold will be imported that will be cheaper, to that extent CAD (current account deficit) will improve."
The list of banks that has already been allowed to import gold includes Axis bank, HDFC Bank, IndusInd Bank, Yes Bank, and Kotak Mahindra Bank.
Following the move, All India Gems & Jewellery Trade Federation's chairman Haresh Soni said that it would lead to smooth supplies and a decline in premiums. He added that the move looked like a step toward the further easing of 80/20 rule.
The 80/20 rule, which was implemented in July last year, makes it mandatory for traders to export at least 20 per cent of all gold they imported. Under this rule, only six public-sector banks and three trading agencies, which had facilitated gold exports in the past three years, were allowed to import gold.
India's gold jewellery exports jumped 1.04 per cent in February this year. It was the first monthly increase in exports of gold jewellery in fiscal 2013-14.