Not to impose ban on gold coin sales by banks: RBI chief

Moneycontrol Bureau

In a bid to ensure genuine investment demand the Reserve Bank of India (RBI) does not intend to ban banks from selling gold coins, said the central bank governor - Duvvuri Subbarao on Tuesday while speaking at a conference in Pune. However, RBI is sticking to its stance of discouraging speculative investments in gold.

On Monday RBI had imposed restrictions on banks and non-banking finance companies (NBFCs) for sanctioning loans against gold coins as well as units of gold Exchange Traded Funds and mutual funds.

"While there may not be any objection to grant of advances against specially minted gold coins sold by banks, there is a risk that some of these coins would be weighing much more, thereby circumventing RBI's guidelines regarding restrictions on grant of advance against gold bullion," RBI had said in a notification.

The central bank proposed to restrict the facility of advances against the security of gold coins per customer to gold coins weighing up to 50 gms.

Traditionally India is the largest consumer of gold. The voluminous gold buying is seen as a key reason for higher current account deficit (CAD), which stood at a record high of 6.7 in October-December quarter, 2012-13.

Earlier, Finance Minister - P Chidambaram had underscored the need for more steps to check gold imports.

"Some more steps, if necessary, would have to be taken, but I appeal to the people of India to contain their passion for gold," Chidambaram had said.

Meanwhile, the regulatory caps prompted some panic-selling in gold loan companies. Investors shunned shares of gold loan companies including Muthoot Finance and Manappuram Finance.

Muthoot shares fell more than 2 percent to close the day's trading at Rs 144 on NSE. Manappuram shares slipped nearly 1 percent to end at Rs 17. The broader index - Nifty 50 rose almost half a percent to close at 6,111 points on Tuesday.