RBI may allow banks to buy back gold from domestic market

Reserve Bank of India (RBI) may allow banks to buy back gold from domestic market. Preliminary discussions have ensued between the banks, finance ministry and the central bank to thrash out the modalities for making this process work. Senior bankers told Financial Chronicle that if RBI gives a nod to banks to buy back gold, it will help the country save foreign exchange as India imports about 800 tonnes of gold through the state-owned trading company Minerals and Metals Trading Corporation (MMTC) and other government-licenced age ncies such as banks and jewellers. It may also help in bringing unaccounted gold into the formal channels. At present, banks are allowed to sell gold, but barred from buying back gold from the local market. “RBI is open to allowing banks to buy back gold but final guidelines on this are still being worked out. We have had a few rounds of meetings with the RBI,” said a senior banker who was one of the participants in the meeting. The key challenge for the banks would be to establish a uniform purity of the gold when they buy it back and to provide storage facilities for the gold bought back. Besides they have to commit capital by purchasing it back. At present, banks import gold on a commission basis for jewellers. Banks are now only allowed to sell gold to retail and bulk customers. The only exception is the State Bank of India that can buy back gold but the minimum quantity is 500 gram.

China Business News