Concerned over rising gold imports, Finance Minister P Chidambaram asked banks to discourage customers from buying gold. While addressing the AGM of the Indian Banks' Association (IBA), the finance minister said that banks can play significant role in dampening the enthusiasm for gold and should advise their branches not to encourage their customers to invest in or buy gold. Moreover, the RBI has already advised banks against selling gold coins, he added. Chidambaram’s statement came a day after the government raised import duty on gold to 8 percent from 6 percent.
Gold import, which is mainly responsible for rising CAD, rose sharply after the fall in prices in the international market. India’s gold imports touched 162 tonnes in May, while in April, it was around 100-120 tonnes, higher than the average monthly import level of 70-80 tonnes. Strong demand of gold has become a worrying factor for the Indian policymakers, as the country is facing a record current account deficit (CAD), which widened to 6.7% in the third quarter of FY13.
However, to curb the gold import, the government has been taking steps regularly, including raising import duty. Further, the RBI too had put in place regulations under which gold can only be imported on a consignment basis to meet the genuine demands of jewellery exporters. It has also increased margin money to 100 percent.
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