NRB tightens screw on gold imports
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KATHMANDU, JAN 20 - Nepal Rastra Bank (NRB) has tightened the screw further on gold imports. The central bank has banned banks and financial institutions even to issue standby Letter of Credit (LC) and bank guarantee in its latest directive issued on Monday.
Earlier, NRB had provisioned that gold importers would have to deposit at least 40 percent of bank guarantee amount in cash to import gold.
Central bank has made it clear that rising imports of gold was the main reason for the widening trade deficit and record high balance of payment (BoP) deficit which stood at 48 percent and 20.49 billion respectively.
Rising gold imports has also been attributed as one of the reasons behind current crisis in the banking system.
The new directive has also barred the importers from importing gold even in credit to be payable after the gold are sold here. The central bank has made it clear that the new directives are subject
to the shipments of gold by Monday.
Importers who have their gold shipped after Monday will have to deposit 40 percent cash with the bank supporting to import gold. In the earlier directive issued two weeks ago, NRB had not barred import of gold for the importers who already had their bank guarantee for the import.
"Our latest directive is aimed at discouraging increasing gold imports," said Rabindra Khanal, Deputy Director of NRB.
Gold imports alone covered 16.18 percent of total imports of the country during the first four months of the current fiscal year and has a huge contribution in widening trade deficit, according to NRB. Slow growth in remittance inflow at just 6.6 percent and increased imports caused country's BoP deficit to hit a record Rs. 20.49 billion. Maintaining BoP remains one of the main duties of any central bank.
Nepal imported around 10 tonnes of gold in the first five months of the current fiscal year.
The latest statistics of Department of Customs shows Rs. 25.59 billion was spent for this purpose, which is way above last year's imports. Nepal had imported the yellow metal worth Rs. 16.57 billion during the same period in 2008/09.
One of the reasons for the rise in gold import is people's growing tendency to buy gold as a safe investment tool.
According to Nepal Gold and Silver Dealers' Association, gold worth around Rs. 6-7 billion a year is enough for jewellery purposes.
On the other hand, finance ministry has also made it clear that the government could hike customs duty on the imports of gold and other goods whose imports have surged in case the measure taken by the NRB failed to address BoP status.
Posted on: 2010-01-20 03:20
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