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Banks to stop gold coin sales

Mumbai, June 27 (): The Reserve Bank of India (RBI) is likely to take away the norms that allowed banks to sell gold coins in view of rising bullion imports which is tilting the current account deficit and weakening the rupee.

In pre -2008 era India witnessed a dollar influx which saw the rupee getting stronger. Taking advantage RBI relaxed and allowed The Banking Regulation Act to import gold coins. The Act does not allow banks to trade in commodities and are supposed to play the role of a financial intermediary in trading. Gold coins which are imported is now done in the backdrop of rupee sliding and dollar inflow dwindling.

RBI In its recent interactions with bankers, asked the banks to go slow on the practice of pushing gold coin sales. However, banks have not stopped the practice of giving incentives to their staff to push gold sales, as banks earn a margin of Rs 100-150 per gram of gold sold.

World Gold Council data says India imported 969 tonnes of the yellow metal in 2012 till date compared to 958 tonnes in the previous year, which amounted to around $60 billion. However, government data shows, gold and silver imports in April and May 2012 came down sharply to $4.3 billion, compared to last year’s $9.2 billion for the same period.

The rupee has depreciated 30 per cent since August and the fiscal and the current account deficit have resulted in investors pulling out from the Indian market. RBI Governor D Subbarao had set up a committee headed by an executive director-rank officer to look into the issue of rising gold imports and formed a committee headed by an executive director-rank officer to examine the reasons. RBI feels that NFCs who are giving gold loans are linked to the rise in gold imports.