* RBI allows 5 pvt sector banks to import gold within set
* Move could boost gold supplies and reduce premiums
* Gold imports seen rising to 40 T/month from more than 20
By Siddesh Mayenkar and Neha Dasgupta
MUMBAI, March 19 India has allowed five domestic
private sector banks to import gold, in what industry officials
say could be a significant step towards easing of tough curbs on
the metal imposed last year to cut the country's trade deficit.
The move could boost gold supplies and bring down premiums
for the metal in the world's second-biggest consumer after
India's central bank has allowed gold imports by HDFC Bank
, Axis Bank, Kotak Mahindra Bank,
IndusInd Bank and Yes Bank, officials at the
respective banks told Reuters.
Two industry sources confirmed the names of the banks. They
and the bank officials did not want to be named as they are not
authorised to speak to media.
India enforced the so-called 80/20 rule in July, making it
mandatory to export a fifth of all gold imports. Under that
rule, only six banks and three state-run trading agencies that
had facilitated export of gold or jewellery in the past three
years were allowed to import. The six banks were mostly
The Reserve Bank of India - the central bank - has now
permitted gold imports within prescribed limits by the private
banks even though they had not facilitated any exports of metal
or jewellery in the past three years.
"They have decided upon limits on quantities depending upon
the number of (current) customers you have for exports," said
Shekhar Bhandari, executive vice-president of Kotak Mahindra
The Reserve Bank of India did not immediately respond to a
request for comment.
The move to allow more banks to import gold may raise
shipments to about 40 tonnes per month from more than 20 in
February, industry officials said. India used to ship in as much
70 tonnes per month, the biggest import after oil that had
pushed the current account deficit (CAD) to a record high in the
year ended March 2013.
"Supplies will be smooth from now and I think premiums will
come down," said Haresh Soni, chairman of the All India Gems and
Jewellery Trade Federation. "This looks like just a beginning to
the further easing of 80/20 rule."
NEW GOVERNMENT, NEW RULES
India used to be the No. 1 buyer of gold before the levy of
a record 10 percent import tax in stages and other restrictions
led to a sharp cut. Premiums hit a record of $160 an ounce in
December, triggering smuggling and forcing industry officials to
call for a repeal of the curbs.
Further major relaxations of the curbs are likely only after
a new government is formed around June, officials involved with
Finance Minister P. Chidambaram said earlier this month the
gold import duty could be revisited only after the final CAD
numbers are out.
The CAD, final figures for which are expected to come in the
first week of June, is likely to fall to less than $40 billion
for the fiscal year ending March 31 from its record $88 billion
in the previous year.
By that time it will also be clear who will form the
government, after India's general elections that start in April.
The main opposition Bharatiya Janata Party - the favourite to
win the polls - has already spoken against the gold import
Its prime ministerial candidate Narendra Modi has said that
any action on gold should look at the interests of the public
and traders, not just economics and policy.
A senior policy official aware of the deliberations said the
government and the central bank wanted to gradually remove the
curbs as falling gold prices are expected to cut the CAD by
"We don't believe in artificial kind of compression of
current account deficit," the official said. "Since it was an
extraordinary kind of situation and it was a policy option
available, we tried that."
The official estimates India's gold imports this fiscal year
to be around 800-850 tonnes, lower than last year's 950 tonnes.
(Additional reporting by Rajesh Kumar Singh in NEW DELHI;
Editing by Krishna N Das and Muralikumar Anantharaman)