Mumbai: Gold can now be brought into the country without any restriction only by jewellery exporters, the Reserve Bank of India (RBI) said on Tuesday, in an attempt to curb consumption of the precious metal that is widening India’s trade gap.
If gold is imported for any other purpose, letters of credit will be issued on full payment in cash, the central bank said in a notification. This is expected to crimp demand.
In its annual monetary policy announced on 3 May, RBI restricted commercial banks from importing gold on a consignment basis in view of the ballooning current account deficit. On Tuesday, it extended this restriction to other agencies as well.
The domestic currency reacted after the announcement. Rupee strengthened to 56.48 from 56.53 before the announcement while yields on the 10-year bond fell two basis points to 7.20%.
Imports of the metal surged 138% in April to $7.5 billion from a year ago, up 72% from March. India imports about $50 billion of gold every year.
Finance minister P. Chidambaram has criticized the “uncontrolled passion for gold” and said it is not a good hedge against inflation. Financial instruments such as inflation-indexed bonds are a better option, Chidambaram said in Mumbai late last month.