RBI has advised banks not to sell gold coins to retail customers, Finance Minister P Chidambaram said a day after the government increased import duty on the metal amid widening Current Account Deficit.
Mumbai: RBI has advised banks not to sell gold coins to retail customers, Finance Minister P Chidambaram said a day after the government increased import duty on the metal amid widening Current Account Deficit.
"I think the RBI has advised banks they should not sell gold coins," he said at the AGM of the Indian Banks' Association (IBA) here today.
This is in addition to RBI's restrictions on gold imports by banks and other agencies. Banks have also been advised to restrict advances against gold coins.
Both the government as well as the Reserve Bank have been taking steps to curb the gold imports, which have averaged 152 tonnes in April and May, resulting in foreign exchange outgo of about USD 15 billion. The average monthly gold import was 70 tonnes in the last fiscal.
Last night the import duty on gold was increased to 8 percent from 6 percent, the second increase within six months.
Chidambaram said the surging imports are unsustainable and advised the banks to tell customers not to invest in the precious metal.
"Banks have a role to play in dampening the enthusiasm for gold... I would urge all banks to please advise their branches that they should not encourage their customers to invest in or buy gold," he said.
Expressing concern over rising CAD, Chidambaram said: "The gold imports have been a major contributor of the CAD. With the sharp drop in gold prices, millions were happy.
"I am afraid I was not among the millions. I told the (RBI) Governor that the drop in gold prices internationally is a bad news for India. Our fears came true."
High CAD which impacts the country's foreign exchange reserves as well as the rupee value had touched a record high of 6.7 percent in the October-December quarter and is likely to be 5 percent of the GDP for the 2012-13 financial year.