The monetary and banking regulator, Reserve Bank of India (RBI), has instructed banks not to provide loans for purchasing gold to anyone in any form. It has prohibited banks from lending for the purpose of buying gold in any way including bullion, jewelry, primary gold, gold coins and bars, units of gold Exchange Traded Funds (ETFs) or units of gold mutual funds.
But, banks have been allowed to extend credit to jewelers for their valid working capital needs. This directive of the central bank comes at a time when the import of gold is high in the economy and any financing by banks for the purchase of gold could fuel the demand for gold further.
It should be noted that at the beginning of this month, RBI has banned banks from lending to jewelers for the purpose of purchase of gold.