In the midst of soaring gold prices, RBI has some breath taking news for jewellers. The regulator has moderated customs on gold loans, which banks give to jewellers. This move could eventually ease jewellery prices. RBI has allowed all scheduled commercial banks to deal in retail gold. Domestic jewellery manufacturers can now take gold from banks even if they are not exporters.
The former gold (metal) loan plan has been modified after a committee suggested that the gold market be opened up. The bullion committee and the central bank have acted on a request from local banks to allow them to extend the existing gold loan plan to jewellers dealing in the local market only.
This will also signal an end to the monopoly of Bank of Nova Scotia, the worlds largest bullion bank, in the Indian market. Till date, RBI has only permitted the Canadian Bank to give gold loans to local jewellers. Other bullion banks like IndusInd Bank, SBI and Corporation Bank were allowed to trade with exporters under the gold loans scheme.
Interest charged on gold, which is given as loan under the scheme, will be linked to interest rates prevailing in the international market. Usually, global rate is 4-6%. Banks will be using imported refined gold bars to give loans to the local jewellers only.
The jewellers are required to repay the bank - value of the gold and interest - within 90 days of taking such gold as loans. Domestic Jewellers can borrow gold up to 25% of their equity and free reserves. However, for the jewellers who are exporters, there is no upper ceiling.
Posted On : 9/8/2005 12:56:50 PM