RBI gold import curbs leave second-fiddle traders in dire straits

Gold  |  2013-06-05 07:36:54   |   By

The fresh series of import regulations by the Reserve Bank of India (RBI) may curb gold imports significantly

NEW DELHI (Scrap Monster) : The fresh series of import regulations by the Reserve Bank of India (RBI) may curb gold imports significantly. The extension of earlier restrictions is said to have unswerving repercussions on the smaller gold traders who are dependent on nominated agencies for their gold supply needs.

The RBI on May 13th had imposed regulations on gold import on consignment basis by banks, restricting them for export use alone. The provisions are now being extended to nominated agencies, premier and star trading houses having government permissions to import gold into the country.

The RBI intends to put brakes on gold imports by cutting down the leverages to gold imports. India’s central bank directed that all Letters of Credit (LC) opened by trading houses and nominated agencies against gold imports should be facilitated by 100% cash margin. No gold imports can be made on ‘Documents against Acceptance’ (DA) hereafter. This essentially means that the nominated agencies would be unable to procure gold on lease, but will have to make the payment upfront.

The worst affected lot is the bouquet of smaller traders who get their supplies from nominated agencies. The nominated houses would be left with no option but to pass on the high cost of procurement down the line. This in turn would push second-fiddle gold traders to crossroads.