If RBI gives a nod to banks to buy back gold, it will help the country save foreign exchange as India imports about 800 tonnes of gold through the state-owned trading company Minerals and Metals Trading Corporation (MMTC) and other government licenced agencies such as banks and jewellers. It may also help in bringing unaccounted gold into the formal channels.
At present, banks are allowed to sell gold coins, but barred from buying back gold coins from the local market. The only exception is the State Bank of India that can buy back gold but the minimum quantity is 500 gram.
According to a senior banker who was one of the participants in the meeting., “RBI is open to allowing banks to buy back gold but final guidelines on this are still being worked out. We have had a few rounds of meetings with the RBI,”
The key challenge for the banks would be to establish a uniform purity of the gold when they buy it back and to provide storage facilities for the gold bought back. Besides they have to commit capital by purchasing it back. At present, banks import gold on a commission basis for jewellers.
If in case it allows banks to buy back gold, the retail customers would be benefited as they are now forced to sell it to Jewellers.
Indian banks sell gold coins of various weights from 2 gm to 100 gm of 24 carat gold to retail investors. The gold for the coins is imported from Swiss refiners with prior permission from the central bank. Besides retail investors, banks also sell gold to jewellers.
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