Reserve Bank allowed lenders to provide gold on loan to jewellers. The measure will enable jewellers to get 180-day credit from banks for buying gold and will reduce their working capital obligations, analysts say.
“All sale of gold domestically will, however, be against upfront payments. Banks are free to grant gold metal loans,” the RBI said.
Subramaniam S, CFO of Titan Industries told NDTV that jewellers can now look forward to a “negative working capital situation”.
According to Maybank, RBI’s notification addresses the liquidity crunch of jewellers, who were made to pay the full amount for buying gold since mid-2013.
“The funding cost of gold will drop as gold will be available on loan by only giving a bank guarantee. Till date, jewellers had to use cash-credit limits,” the brokerage added.
The central bank has also lifted the ban on imports of gold coins and medallions by banks and trading houses. The move will improve the supply of gold in the market and aid revival of demand of jewellery retailing and gold coins, Maybank said.
“It also shows RBI’s comfort due to rising forex reserves,” said Deven Choksey, managing director, K R Choksey Securities in Mumbai.
The central bank also clarified that so-called star or premier trading houses would be allowed to import gold without any end use restrictions.
RBI has been easing gold import norms since November 2014, when it scrapped the 80:20 rule, which required jewellers to export 20 per cent of total gold imports. The scheme, meant to curtail gold imports in the country, was introduced in August 2013.
Gold imports surged 8.13 per cent year-on-year to $1.55 billion in January on easing of restrictions by the RBI. India is the largest importer of gold, which is mainly utilized to meet the demand of jewellery industry.
The government kept its current account deficit in check between July and September 2014 despite easing curbs on gold imports, thanks to a sharp increase in foreign investments and cheaper oil.
As of 11.06 a.m., Gitanjali Gems traded 3 per cent higher at Rs 55.75; TBZ traded 1.3 per cent higher at Rs 177.80; Rajesh Exports was up 0.34 per cent at Rs 175.65 and Titan Company traded 0.7 per cent higher at Rs 433. The broader Sensex was down 0.44 per cent at 29,192.