RBI Says No Credit for Gold Import, Pay Cash

[RBI Circular No. 103 dated 13^th May 2013]

Sub: Import of Gold by Nominated Banks/Agencies

Attention of Authorised Persons is invited to paragraph 97 of the Monetary Policy Statement 2013-14 dated May 3, 2013 regarding import of gold. In terms of AD(G.P.Series) circular No.7 dated March 6, 1998 (copy enclosed for ready reference), nominated banks/agencies were permitted to import gold on loan basis, Suppliers Credit/Buyers Credit basis, consignment basis as also on unfixed price basis.

2. The Working Group on Gold (Chairman: Shri K.U.B. Rao) had recommended aligning gold import regulations with rest of the imports for creating a level playing field between gold imports and other imports. Bulk of the gold imported by nominated banks is on consignment basis whereby nominated banks do not have to fund these stocks. To moderate the demand for gold for domestic use, it has been decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewellery.

Paragraph 97 of the Monetary Policy Statement 2013-14 Issued on 3 May 2013

Import of Gold

97. The Working Group on Gold (Chairman: Shri K.U.B. Rao) had recommended aligning gold import regulations with the rest of imports with a view to reducing gold imports by creating a level playing field between gold imports and other imports. Currently, banks authorised by the Reserve Bank are permitted to import gold on: (i) consignment basis; (ii) unfixed price basis; and (iii) loan basis. Gold is also imported directly by export oriented units (EOUs) / units in Special Economic Zones (SEZs) in the gems and jewellery sector and nominated agencies / banks using letters of credit (LCs). The bulk of the gold imported by nominated banks is, however, on consignment basis whereby the nominated banks do not have to fund these stocks. With a view to reducing the demand for gold for domestic use, it is proposed to:

• restrict the import of gold on consignment basis by banks only to meet the genuine needs of exporters of gold jewellery.

Detailed guidelines will be issued by end-May 2013.

3. The above instructions will come into force with immediate effect. ADs may bring the contents of this circular to the notice of their constituents and customers concerned.

4. All other instructions relating to import of gold issued from time to time shall remain unchanged.

5. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999).

[RBI Circular No. 07 dated 6^th March 1998]

Sub: Import of Gold by Nominated Banks/Agencies

1. Under the liberalised policy for import, Government of India has permitted import of gold by certain nominated agencies viz. MMTC, HHEC, STC, SBI and other agencies authorised by Reserve Bank for sale to jewellery manufacturers, exporters, NRIs, holders of Special Import licences and domestic users [cf. paragraph 8.15 of Exim Policy 1997-2002]. It has, therefore, been decided to permit the nominated agencies/banks to import gold under different arrangements, besides outright purchase on D/P basis, as follows:

2. (i) Import of Gold on loan basis

Gold loan may be availed of by nominated agencies/banks, where the loan is denominated on the basis of the quantity of gold, subject to the following conditions:

(a) The loan shall be obtained directly from the overseas supplier.

(b) The period of loan shall not be more than 180 days from the date of shipment. Extension of period beyond 180 days will require prior approval of Central Office of Reserve Bank (Imports Division).

(d) Metal account in the books of the overseas supplier, if required by the supplier, may be maintained by the nominated bank/agency for the purpose of routing the import transactions only. No deposits will be permitted.

(e) Guarantee for the loan, if required by the supplier may be furnished by the nominated agency.

(ii) Import of gold on Suppliers credit/Buyers credit basis

Supplier's credit up to a period of 180 days may be availed of by the nominated agencies/banks subject to the provisions of paragraph 7A.12 of Exchange Control Manual 1993. Prior approval of Reserve Bank will be required if the period of credit exceeds 180 days. However, buyer's credit will require prior approval of Reserve Bank irrespective of the period of credit.

(iii) Import of Gold on Consignment basis

Gold may be imported by the nominated banks/agencies on consignment basis wherein the ownership of the goods will rest with the supplier and the importer [consignee] will be acting as an agent of the supplier [consignor]. Remittances towards the cost of import shall be made as and when sales take place as per the provisions of agreement entered into between the overseas supplier [consignor] and nominated agency/bank (consignee).

(iv) Import of gold on unfixed price basis

The nominated agency/bank may import gold on outright purchase basis subject to the condition that although ownership of the gold shall be passed on to the importer at the time of import itself, the price of gold shall be fixed later/ as and when the importer sells the gold to the users.

3. The directions contained in the circular have been issued under Section 73(3) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.