The bulk of the imports by banks now is on a consignment basis that doesnâ€™t require them to fund the purchase, RBI said.
NEW DELHI(BullionStreet): Conflicting reports about India's gold import projection created confusion among traders and jewelers in the world's largest consumer country.
Some reports said India’s gold imports are likely to fall below 900 tons this year due to Reserve Bank of India's (RBI) decision to curb gold bullion imports by banks.
The RBI will issue guidelines by the end of this month to restrict banks from importing gold on a consignment basis as it seeks to reduce domestic demand and curb a record current-account deficit, the central bank said on 3 May.
Banks will be allowed to buy on a consignment basis to meet only genuine needs of exporters of jewellery.
The bulk of the imports by banks now is on a consignment basis that doesn’t require them to fund the purchase, RBI said.
The Reserve Bank has said the current-account shortfall, exacerbated by bullion imports, and consumer-price inflation above 10% are among risks that constrain room for further interest rate cuts to revive economic growth from the lowest in a decade.
Other reports said Gold imports by India are set to exceed 100 tonnes for a second month in May as jewellers rush to beat central bank curbs on overseas bullion purchases by banks.
The biggest slump in gold prices in more than three decades on 15 April spurred banks, traders and consumers towards gold.
The reports said everyone is trying to import as much as possible before the RBI guidelines are issued.
Retail buyers flocked to jewellery stores and bank outlets in India to buy ornaments and coins after gold plummeted 14% in two sessions through 15 April in the worst slide since 1983, causing a shortage in supplies.
India’s gold imports dropped 11% last year to 860 tonnes from a record 969 tonnes in 2011, the World Gold Council estimates. Demand for jewellery and investment fell to 864.2 tonnes in 2012, the second straight year of decline, it said.
However,most analysts are of the view that appetite for gold continued to be very strong in India and an index of physical flows showed demand five times that of a 12-month average, UBS AG said on 3 May.
Appetite is likely to hold up as India get closer to the Akshaya Tritiya fetival.
Akshaya Tritiya festival is considered by the country’s more than 900 million Hindus as the traditional day to buy precious metals. Bullion is bought during festivals and marriages as part of the bridal trousseau or gifted in the form of jewellery by relatives.