Reserve Bank of India ‘concerned’ by March gold import figure

Otmane El Rhazi from The Bullion Desk.

The Reserve Bank of India is keeping a close eye on domestic gold imports, delegates at the Dubai Precious Metals Conference told FastMarkets on the sidelines, following the huge influx of metal in March.

The country may have imported 125 tonnes of gold in March, well above the February total of 55 tonnes and 60 tonnes in the same month of last year, although local reports remain unconfirmed.

The central bank was concerned by the rumoured jump particularly given that there are already large stockpiles of gold in India following huge imports at the end of 2014 and subdued demand since the start of this year.

While the Hindu festival of Akshaya Tritiya on April 21 is expected to boost turnover for the metal, 125 tonnes equates to around 15 percent of annual domestic demand.

According to sources with knowledge of the matter, the RBI contacted banks and trading houses directly to ask why such a large amount of gold had been imported in March.

The bank will take a firm stance on imports and could make a decision on a cut to the import on the metal based on whether this trend continues in April, sources also suggested.

While many had been expecting a duty cut in the country’s budget at the end of February, finance minister Arun Jaitley instead opted for a series of gold monetisation schemes, further details of which are expected in May.

It is already known that India will introduce a sovereign gold bond as an alternative to physical gold. The bonds will carry a fixed interest rate, and be redeemable in cash pegged to the face value of gold at the time of maturity. Other than giving investors a long exposure to gold, it also provides the advantage of earning a fixed interest rate – gold typically has no direct yield.

A new gold monetisation scheme will also replace the current gold deposit and loan schemes in a bid to free up some of the 25,000 tonnes of gold owned by families.

Several reasons such as high melting costs and the long time horizon of investment have rendered older schemes unsuccessful; the removal of restrictions on the minimum size of deposits is seen as making the scheme more accessible.

(Editing by Mark Shaw)

The post Reserve Bank of India ‘concerned’ by March gold import figure appeared first on The Bullion Desk.