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Gold imports to India improve after end of payment crisis

Bullion imports into India, the world's largest consumer, have picked up after a slowdown earlier this month due to a payment crisis involving a troubled co-operative bank, dealers said on Monday.

"The market is better and we have increased our imports to meet the seasonal demand," Deepak Shah, a leading trader Ahmedabad, said.

A number of commercial banks in Ahmedabad had cut their gold dealings after payment orders worth Rs 696 million from a co-operative bank on behalf of a bullion dealer bounced.

The Reserve Bank of India has launched an investigation and has asked the banks to tighten their risk management rules.

Dealers said around 7,000 bars of 116.64 grams each were being imported every day through Jaipur, the capital of Rajasthan, which is emerging as a leading gold trade centre due to lower local taxes.

Around 4,000 bars are being flown to Ahmedabad every day compared with 2,000 bars during the payment crisis.

Traders said commercial banks hit by the pay order scam had yet to increase buying but state-run trading agencies had stepped up imports.

"Agencies like State Trading Corporation and MMTC Ltd are importing and meeting the demand of jewellers," one trader said.

Dealers said lower customs duties announced in the federal budget in February were discouraging imports through unofficial channels and boosting sales.

"Prices have come down due to the cut in duty which is helping increase sales in the current marriage season," bullion importer Yashwant Thakkar said.

In February, India reduced the duty on gold imports to Rs 250 per 10 grams from Rs 400.

Traders forecast that India's demand will continue to remain strong until the end of the wedding season in June.

India imports most of its requirement of gold, which is gifted at weddings and festivals.

According to the industry-funded World Gold Council India's gold demand in 2000 was 855.2 tonnes. That figure included imported and locally available gold.

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