Traders have said they will start importing gold again over the next week or so after the RBI clarified a new rule that brought the flow of the precious metal into the country to a standstill at the end of July.
A resumption of imports would ease tight domestic supply and prices ahead of a festival and wedding season that kicks off next month. Indian imports would also support benchmark international gold prices, which hit a two-month high on Monday.
Indian traders stopped imports on July 22 due to confusion over a rule issued by the Reserve Bank of India that was aimed at stemming the flow of gold into the country, not stopping it completely.
Gold imports are a big contributor to the country’s record trade deficit, so the central bank is trying to slow them down.
The confusion centred on a rule that required importers to re-export at least 20% of all imports, known as the 80/20 rule.
Last week, the Reserve Bank issued detailed guidelines on how the rule would work, but the complexity of the rule had prevented banks from importing immediately. Banks are the main importing agencies for gold into India.
“I've spoken to many banks and I believe imports may start within this week. (Last week's) circular has clarified many things for importers,” said Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation.
“Once the imports start, premiums will come down,” said Bamalwa, who expects premiums charged on London prices to fall to $10 an ounce from $40 on Monday.
Since the rule is new, the importing agencies are taking time to get a grasp on the many operational procedures involved, including the undertaking that needs to be submitted to the customs department once the goods are delivered to an exporter for the next lot of imports.
“From operational or concept point of view, the RBI circular is very clear. We would take at least a minimum of 10 days to start importing again,” said an official with foreign bank importing bullion in Mumbai.
To cut its import bill, India has tightened rules to curb gold consumption, increased import duty three times in eight months to a record 10% and banned imports of coins and medallions.
Analysts have said the moves may curb imports but not demand which is at heightened levels due to a fall in gold prices, and could prompt an increase in local premiums and smuggling.
The higher taxes have