Mumbai, June 9 () : RBI has now targeted the cooperative banks in controlling gold prices. RBI (Reserve Bank of India) which put similar curbs on banks and NFBCs has now put restrictions on gold coin loans to control the demand for the yellow metal.
Gold has hit a record high. Now gold coins worth 50 gms can be got from a customer. Units of gold in ETFs and mutual funds are already under curbs by RBI.
Within the board approval limit only, gold jewellers and banks can give loans. ETF and mutual funds related to gold cannot get loans from banks as per new RBI norms. With RBI cracking on gold, the Finance Ministry increased import duty by 2% taking it to 8%. The measure has not curbed demand for the metal.
Earlier banks were allowed to import on consignment basis and for exporters of gold ornaments. Now bullion dealers and agencies have been asked to follow this norm. RBI to curb speculation has told banks that if anybody imports gold, he/she has to deposit the total amount upfront.
Non-banking firms cannot give loans for purchase of gold. This includes loans to purchase ETF and mutual funds linked to gold. The money taken as loan to buy gold is pumped back into market thus fuelling price rise.
With global prices decreasing, demand for gold within India is increasing and widening Current trade deficit is pulling rupee down against dollar. Finance Ministry and RBI are fighting a losing battle. The demand is not slowing down in spite of high prices. The only option would be to stop import of gold but again the free trade barrier with countries that trade in gold is a problem.
RBI’s idea is that once gold cannot be pledged to get money then it would come to the market and jewellers would cut import bill. This gambit is yet to prove right.