INDIA'S central bank is considering a ban on sales of Gold Coins by Indian banks, according to Indian press reports.
A central bank source argues that imports of Gold Bullion are exacerbating the Rupee's weakness against the Dollar, making a case for ending Gold Coins sales by banks. Banks were allowed to sell Gold Coins following a relaxation of rules on commodities trading aimed at sterilizing Dollar inflows, which saw the Rupee appreciate in the years before 2008.
"Banks were allowed to sell gold by importing it to fight the excess Dollar flows," says a senior Reserve Bank of India official, quoted by Business Standard.
"By the same logic, the measure should be reversed now as we are at the opposite end of the spectrum. It was a temporary measure, which unfortunately was made permanent by banks."
Indian banks saw sales of Gold Coins rise by a third to 18 tonnes last year, according to news site Money Control.
Total Indian gold demand last year was 933.4 tonnes, World Gold Council data show. Of that, 366 tonnes took the form of Gold Coins or bars, with India accounting for 25% of global Gold Investment demand in the form of Gold Coins or bars.
Earlier this year, the RBI tightened its rules on gold lending companies, while it also set up a working group to examine the industry. Finance minister Pranab Mukherjee meantime said this month that Indians should invest in "wealth generating" assets rather than Buying Gold. Mukherjee has twice this year raised duties on gold imports.
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