Mumbai: The Reserve Bank of India (RBI) has allowed 7 more banks to import gold and silver, bankers and trade officials said on Monday, a move that will smoothen supply in the world’s largest consumer of the metals.
Gold jewellery has traditionally been a big draw at marriages in the world’s second-most populous country, and this has been supplemented by investment demand in the past year or so.
India, which hardly mines any gold on its own, imported 624 tonnes of the yellow metal in the first three quarters of 2010, up 120% on year, World Gold Council data shows.
Karur Vysya Bank, Punjab and Sind Bank, South Indian Bank, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore and State Bank of Travancore, are the new banks that have been given permission, data on the RBI website showed.
This has taken the total number of banks that can ship precious metals into the country has risen to 30, raising the prospect of better competition and helping supplies.
Banks contribute 80% of the 700 tonnes that India annually imports.
“The RBI is opening up and more banks are good for the industry. The network of gold supply would widen and there will be fair competition,” said Pinakin Vyas, assistant vice-president with IndusInd Bank in Mumbai.
Gold is one of the regulated sectors in India and the federal government allows state-run and private banks to trade in bullion at the wholesale and retail level. Jewellers sell coins and bars through retail outlets.
Imports to rise
Demand for gold investment may have risen 25-30% in the second half of 2010 from a year ago as a shift in preferences from jewellery to exchange-traded funds (ETF), bars and coins gathers pace, the head of a spot bullion exchange has said.
The mandate for additional banks to import precious metals are likely to increase purchases and also help banks in boosting their gold lease facility for manufacturers.
“These banks now can import directly, get more customers and increase trading volumes. It could mean more imports,” said a Singapore-based dealer. “But the banks listed are small banks.”
Gold loan is a facility given to manufacturers where the bank leases the yellow metal, upon guarantee that they would pay the proceeds of the loan in a maximum of 180 days.
“Not many banks were active in gold loans (for traders), so more number of banks would make this part of the trade active,” a trade official who requested not to be identified said.
Traditional buyers of jewellery in India are shifting their preferences to coins on they see the potential for blistering growth this year and a bullish price outlook.
“These are mostly rural-focused banks, which would enable them to sell more coins in those areas, where we’ve seen double-digit growth in sales,” said a official with a state-run bullion importing bank in Mumbai.
Sales of investment products could outpace jewellery demand in one to two years.