RBI restricts gold imports by banks to ease pressure on CAD
To moderate the demand for gold for domestic use, the Reserve Bank of India has decided to restrict the import of gold on consignment basis by banks only to meet the genuine needs of exporters of gold jewellery.
This restriction, which has come into force with immediate effect, has been imposed in the backdrop of rising gold imports exerting pressure on India's current account deficit.
The RBI curb also comes on a day when government trade data showed that gold imports jumped by 138 per cent to $7.5 billion in April, highest so far this year, pushing up the trade deficit to $17.7 billion. This is likely to worsen the current account deficit (CAD) this fiscal.
CONSIGNMENT BASIS
In the transaction involving import of gold on consignment basis, the ownership of the gold remains with the overseas supplier and the Indian importer acts as the former's agent. The Indian bank remits the cost of import as and when the sale takes place.
The CAD, which is a key indicator of a country's external vulnerability, arises when a country's total imports of goods, services and transfers' is greater than exports. Read more
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