India considers buying gold from citizens to ease rupee crunch
The Reserve Bank of India (RBI) might soon apply a drastic measure allowing commercial banks to buy gold from ordinary citizens, in the latest desperate effort to limit bullion imports and reduce the country's current account deficit.
For months now Ministry of Finance authorities have been implementing various rules and regulations to try and salvage India's trade balance, but apparently to no avail.
By purchasing the yellow metal importers are depleting the country's forex reserves and jeopardizing the stability of the rupee, the government has warned.
A source familiar with the RBI’s plans told Reuters a pilot project letting banks to buy back from individuals all sorts of gold items, from jewellery to bars and coins, will be launched soon.
Experts explain that physical gold demand tends to be extremely price driven and that is why this year’s price drops have resulted in a surge of interest in Asia.
Last month, India bought close to 47 tonnes of gold, compared to the 31 tonnes imported the previous month. And according to some estimates, Indian households are hoarding close to 20,000 tonnes of gold worth some $1 trillion, representing 50% of the country's GDP.