Certain part of gold ETF corpus can be loaned: RBI panel
By Vaibhav Aggarwal
Jan 4, 2013
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The Reserve Bank of India panel has suggested in its report that that a certain part of the gold exchange traded funds can be loaned to permitted categories of bulk gold importers to import gold. The panel has decided this as large gold imports have been a cause of concern in the economy.

The RBI draft has been published on the RBI websites for reactions and suggestions. The RBI panel draft under the chairmanship of Mr. K U B Rao, adviser, department of economic and research in RBI to study issues related to gold and gold loans by non-banking finance companies (NBFCs) said, "To put the gold with Indian ETFs to productive use and reduce the demand for gold, we may think about putting a certain part of the total corpus of the fund to be ‘loaned' to the permitted categories of bulk gold importers like nominated agencies to import gold".

Some importers in India have access to gold borrowings with pre-specified limits and they pay interest for gold borrowed. At the end of the tenure the transaction is eventually settled by purchasing gold. Such a step can increase the returns on the ETF investments and thus the demand of the gold imports is postponed and thereby reducing the pressure on stressed balance of payment, the RBI panel said.


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