MUMBAI May 16 MMTC-PAMP has become the first Indian gold refiner to join the London Bullion Market Association's good delivery list, a global benchmark for quality, which could help encourage Indians to sell hoarded stocks of gold bars and jewellery.
The LBMA said on Friday it was satisfied with the ownership, history, production capability and financial standing of MMTC-PAMP and that the refiner had passed exhaustive testing procedures, under which its gold bars were examined by independent referees, and its own assaying capabilities were tested.
MMTC-PAMP is a joint venture between Swiss refiner PAMP SA and Indian state-owned trading company MMTC, the largest importer of gold and silver in the Indian sub continent. It joins 70 other refiners on the LBMA list.
"There was a lack of a credible refining facility, and now we have addressed that vacuum," Rajesh Khosla, managing director of MMTC-PAMP, told Reuters.
An estimated 20,000 tonnes of gold is held by Indian households as a store of wealth rather than using bank accounts and financial instruments.
The government wants them to monetize some of those holdings to increase the amount of gold in circulation and help reduce imports. MMTC-PAMP processes not only ore but also gold scrap for resale in the domestic market.
"There were major proposals discussed last year to monetise the above-ground stocks, and the major missing piece in this was a lack of credible refining facility," Khosla said.
"Now that we've been approved, it should give banks and regulators confidence to aggressively push for monetisation of above-ground gold."
The government last year introduced a series of restrictions to discourage gold imports after India's high current account deficit (CAD) pushed the rupee to record low levels against the dollar. Its gold import bill came second only to that for crude oil.
Industry bodies including the All India Gems and Jewellery Trade Federation, which groups more than 300,000 jewellers, have been pushing to help mobilise household gold stocks but have encountered obstacles including the lack of an LBMA-approved refiner.
India is the world's second-biggest consumer of gold after China, but out of the total of 1,000 tonnes of consumption, only around 150 tonnes are refined domestically.
MMTC-PAMP, which has 100 tonnes of installed capacity, refined 40 tonnes of gold last year and plans to refine 80 to 85 tonnes this fiscal year to March 2015.
Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation, said the availability of LBMA-accredited refining capacity would increase confidence in the purity of gold bars refined domestically.
"The overall cost and premiums will come down and consumers and the industry will benefit from this," he said.
Premiums on physical gold in India were at $110 an ounce over London prices on Friday.
Meanwhile, the Reserve Bank of India has indicated that it aimed for a slow and steady removal of restrictions as the current account deficit comes under control. (editing by Jane Baird)