Jewellery Makers, Retailers Cheer RBI Move on Gold Imports
Indian retailers and jewellery makers have a reason to cheer, as easing Gold prices are likely to bring lot of relief to upcoming heavier expenses during this wedding season in India.
The Reserve Bank of India timing on removing the import curbs and allowing new players to import Gold under the 20:80 scheme could not be timed better.
As per the Hindu calendar, the month of May and June are an auspicious period to get married, and according a lot of marriages are planned.
Hence, people who want to buy Gold for marriage or other purpose simply have a reason to rejoice.
The jewellers, bullion dealers and other trade bodies had been lobbying hard with the RBI for easing of the Gold import norms for quite some time.
Following yesterday’s decision, Gold prices fell by as much as Rs 800 in trades on the MCX (Multi Commodity Exchange) yesterday 21 May, 2014.
It may be recalled that MCX Gold futures has zoomed to highs of Rs 35,000-odd levels in August 2013. And now they are back at Rs 27,300-odd levels – which co-incidentally were also the lows of August 2013.
WHAT DID THE RBI DO?
The RBI on Wednesday allowed new players like – scheduled commercial banks and other agencies which are authorized dealers in forex exchange to import of Gold.
Following which, Star Trading Houses / Premier Trading Houses (STH/PTH) which are registered as nominated agencies by the Director General of Foreign Trade (DGFT) may now import gold under 20:80 scheme subject to the following conditions:
- The STH/PTH should have imported gold prior to the introduction of 20:80 scheme.
- The first lot of gold under this scheme would be based on the highest monthly import during any of the last 24 months.
Further, it has been decided to permit the nominated banks, to give Gold Metal Loans (GML) to domestic jewellery manufacturers out of the eligible domestic import quota of 80 per cent to the extent of GML outstanding in their books as on March 31, 2013.
WHAT IS THE 20:80 SCHEME?
As per an earlier RBI circular any Gold imported under the 20:80 scheme, the importers are required to retain 20 per cent of the imported Gold in customs warehouses and will be permitted to undertake fresh imports only after 75 per cent of the stock is exported.
If any importer fails to export 20 per cent of the Gold from the arrived consignment, he would be barred from importing any more Gold.
So basically in a 20:80 scheme, the 80 per cent of the import Gold is for domestic usage, and the rest 20 per cent is used for exports.