Commercial banks can now sell gold directly to gold traders and jewellery shops if the private sector umbrella bodies fail to recommend the names of buyers within 15 days of issuance of the sales notice by the banks, as Nepal Rastra Bank (NRB) — the central regulatory and monetary authority — today issued a circular amending the Gold Import and Distribution Guideline-2011. The amended guideline also barred the fees charged by the associations of gold traders and jewellery shops.
“We’ve made amendments to the respective guideline to simplify the gold distribution process,” said Bhisma Raj Dhungana, acting executive director of Foreign Exchange Management Department of NRB.
The earlier provision prevented banks from distributing gold without the recommendations of the federations of gold and jewellery dealers. Federation of Nepal Gold and Silver Dealers’ Association, Federation of Nepal Gold Silver Gem and Jewellery Associations, and Federation of Handicraft Associations of Nepal are authorised to recommend gold quota to firms
under their federations.
NRB barred the respective federations to charge recommendation fees, as gold traders were complaining since long that they were compelled to pay recommendation fees of Rs 5,000 per kg charged by federations. The new provision in this regard is expected to encourage gold traders to buy gold from formal channel.
As the different federations issued very few recommendations, gold has been piling up in the vaults of the commercial banks.
“We don’t know how the market demand is being met as more than 300 kg gold has piled up in 30 commercial banks,” said Saroj Guragain, chief finance officer of Sanima Bank. Only commercial banks are authorised to import gold in the country.
Bankers had also requested NRB to simplify the gold distribution process drawing attention to the fact that the government has been losing revenue as gold and jewellery dealers are being tempted to turn to the informal markets.
The central bank is authorised to set the limit for gold import quota, which is 15 kg per day. Import of gold declined heavily in this fiscal 2014-15, as commercial banks
received very low demand of gold from the beginning of this fiscal. The country has imported gold worth Rs 1.81 billion in the first five months of this fiscal. In comparison, the country imported yellow metal worth Rs nine billion in the corresponding period of last fiscal.
Banks have been discouraged to import more gold because investment in gold is not generating any returns and the insurance cost is increasing with the yellow metal parked in their vaults.
Central bank’s Gold Import and Distribution Guideline-2011 also mentioned that banks can only set a 0.5 per cent profit margin while selling gold to dealers and also prevented the latter from charging over 0.5 per cent to consumers.