Role of Banks in Gold Imports and Retailing Gold Coins

Abstract

Approximately 56 per cent of the gold imported into the country is canalised by the nominated banks. The role of banks in gold is multi-fold. Banks provide loans against the collateral of gold jewellery; they canalise gold for the purpose of providing gold to the gold jewellery industry and also sell retail gold in coins through their branch network. However, banks are not authorised to finance purchase of gold. In this context, there are concerns that whether the import deals of banks in gold and sale of gold by banks through imports to individuals is feeding into the appetite for gold.

The research paper conducts an analytical study into the gold imports by banks and proliferation of gold schemes and measures taken for regulating bank and NBFCs finance for the purchase of gold and loan against surety of gold. The study explores the sale of gold coins by banks to individuals, buy back of gold coins from individuals by banks, Gold jewellery loans by commercial banks, permission for banks to use the future markets to hedge bulk gold purchases. The study reveals the impact of MGL* and rationale of application of Base- rate** on MGL.

Research Methodology: The research paper is based on analytical approach, wrote in APA style and secondary sources of data are used.

Keywords: Gold Imports, Retailing Gold Coins, Banks and Bullion Market Reserve Bank of India (RBI), Certified Gold Products, Financial Inclusion, Gold Monetization Scheme, Investment in Gold