India's central bank to relax the new guidelines for gold import control immediately

The Bank of India (RBI) revised its gold import guidelines on Wednesday (May 22) and immediately entered into force, allowing two traders outside the authorized banks to import gold to promote gold exports, but still comply with the 20:80 guidelines. In addition, the bank is allowed to make mortgage loans to the gold jeweler's 80% gold import quota. After the news came out, the Indian rupee exchange rate against the US dollar hit an 11-month high of 58.47.

The two traders registered with the General Directorate of Foreign Trade of India (DFGT) are Star trading houses (STH) and premier trading houses (PTH).

Earlier Wednesday, new Indian government officials said that the new finance minister is communicating with the central bank to ease gold import controls to curb crazy gold smuggling. Last Friday (May 16), the Bharatiya Janata Party won the election with an overwhelming advantage. The new Prime Minister, Narendra Modi, previously said that he would relax the gold import controls after taking office.

In the first half of last year, due to the surge in Indian gold imports, the country’s current account deficit has over-expanded. The Indian government has gradually raised the gold import tariff to a record high of 10%, and RBI has also issued the so-called 20:80 import guidelines, requiring imports. One-fifth of the imported gold is used for export purposes.

However, strict gold import restrictions once caused a shortage of domestic supply in India, and the number of gold smuggling surged. Previously, domestic jewelers, banks, trade groups and gold traders had asked the government and central banks to relax gold import controls as soon as possible.

RBI pointed out that "the revision of the gold import guidelines is also based on the consideration of most previous business representatives and the government."

India's current account deficit (CAD) in the 2012-13 fiscal year has soared to a record high of $88.2 billion (GDP 4.8%), but CAD is expected to fall back to $32 billion (GDP 1.7%) in FY13-14.

Haresh Soni, chairman of the All India Jewelry Trade Alliance (GJF), said, “The central bank’s relaxation of gold import restrictions has made an important step in boosting the domestic gold industry, and we believe that supply will continue to increase in the future.”

Soni pointed out that "the relaxation of import standards will help the domestic gold price decline and cut the premium level. The current domestic gold premium is at 80-90 US dollars / ounce, still at a relatively high level."

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