Clearing its stand, Reserve Bank of India (RBI) on Saturday said that it is not considering any proposal to buy idle gold and convert it into bullion. In a statement issued by the central bank, it said, “The RBI clarifies that no such proposal is under its consideration at this juncture.” There have been various reports suggesting that the RBI might be thinking over the option of converting idle gold.
Demand for gold is the reason for rise in import of the precious metal. The rising gold import is one of the main reasons for the Current Account Deficit (CAD), which widened to a record 4.8 per cent of GDP in 2012-13 fiscal.
Gold imports jumped by 87 per cent to 383 tonnes during April- June quarter as compared to 205 tonnes during the same quarter in the previous financial year. In value terms, the increase was 68 per cent from Rs 56,488 crore to Rs 95,092 crore.
In order to curb the rising import of the precious yellow metal, the Government and the central bank have taken multiple steps including increasing the custom duty on gold imports to 10 per cent. All this is being done to reduce the gap between the import and exports in order to bring down the country’s CAD to the target of 3.7 per cent of GDP, or $ 70 billion, in FY14. In FY13, country’s CAD touched a record high of 4.8 per cent of the GDP or $ 88.2 billion.
On the other hand, RBI earlier had directed the banks to import yellow metal strictly on consignment basis. It also said that it should be bought on 100 per cent cash margin. On the other hand, the Government has steadily increased import duty on gold to 10 per cent from 2 per cent.