India central bank takes another anti-Gold strategy
Analysts however said though the move was aimed at curbing rising gold demand, the impact would be minimal, as banks did not have any significant exposure in this sector.
As part of it's efforts to discourage gold's usage, India's central bank, the Reserve Bank of India (RBI) barred banks and non-banking finance companies to extend loans against units of gold exchange traded funds (ETFs) and gold mutual funds.
Analysts however said though the move was aimed at curbing rising gold demand, the impact would be minimal, as banks did not have any significant exposure in this sector.
During the annual policy review earlier this month, RBI had told banks to ensure the weight of any specially minted gold coin did not exceed 50g per customer.
And, the amount of loan to any customer against gold ornaments, gold jewellery or gold coins, weighing up to 50g, should be within the Board-approved limit.
Banks have since asked RBI whether an advance against units of gold ETFs or gold MF's are permitted. As a result, the central bank clarified that the restriction also applied for such products.
Gold ETFs had assets under management of Rs 11,648 crore at the end of the March quarter, according to data from the Association of Mutual Funds in India.
Companies accounted for the bulk of the assets, at Rs 6,345 crore; retail investors were second with Rs 3,124 crore. Banks, foreign institutional investors and wealthy individuals accounted for the remaining amount.
RBI has further clarified that no advances be given by NBFCs against primary gold and gold coins.
It has also said NBFCs should not grant advances for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold ETFs and units of gold MFs
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