The INDIAN GOVERNMENT's financial services secretary today called gold investment "wasteful expenditure" as the finance minister urged commercial banks to advise customers against investing in gold coins.
Both Rajiv Takru and P.Chidambaram were speaking to journalists at the annual conference of the Indian Banks' Association (IBA) in Mumbai.
Gold investment by Indian households accounts for 10% of annual savings, according to a 2012 report by Morgan Stanley. Matching the level of household bank deposits, it outpaced retail investment in the stock market 11-fold between 2008 and 2011.
A report from the Prime Minister's Economic Advisory Council in April blamed private gold investment – whether in jewelry, coin or bar – for "reduc[ing] the domestic financial resources available for supporting capital formation at home."
With zero domestic mine output, but the world's heaviest annual gold demand, India is a persistent net importer of gold.
After India's government on Monday reported gold imports of 162 tonnes for May – twice the monthly average seen in 2011, a record year for Indian inflows according to Reuters – the government on Tuesday blocked all new imports unless fully cash paid or for re-export by jewelry fabricators.
On Wednesday it then raised import duty on all gold bullion imports to 8% by value.
"Banks have a role to play in dampening the enthusiasm for gold," finance minister Chidambaram said Thursday.
"I would urge all banks to please advise their branches that they should not encourage their customers to invest in or buy gold."
Further steps to curb gold imports are being considered, Takru confirmed.