Duty hike leaves banks with 325 kg of unsold gold

KATHMANDU, SEP 22 -

Given the low demand and easing supply from smugglers, gold imported by banks has been pilling-up for nearly one month. Around 325 kg of the yellow metal has remained unsold before the festive season, a time when gold is normally in demand.

Bullion dealers, who were supposed to buy the metal from the banks, have been saying that they are not taking the gold for the slowdown in demand from customers in the retail market. They also stated that banks were refusing to sell their old delivery base at the old customs duty rate, keeping dealers away.

Of the total 325 kg, 300 kg of the banks gold was imported before the government imposed a new customs duty. 10 days ago, the government increased the customs duty from Rs 3,600 to Rs 5,200 per 10 gm. “If we buy the older consignments as per the new duty fee, the price would increase further, discouraging customers at a time when business is already low,” said Suresh Man Shrestha, a gold dealer associated with the Federation of Nepal Gold, Silver, Gem and Jewellery Association.

As per Shrestha, dealers could buy the gold from banks if the demand of the Dashain festival picks up. The daily consumption increases up to 40-kg a day in the festive season, normally, according to gold traders. However, according to the Federation of Nepal Gold and Silver Dealers’ Association (Fenegosida), with the price of the metal increasing, customers are opting to sell the gold rather than buying it this season. He said that there was estimated daily demand of 15-20 kg.

“Some of the precious yellow metal has been bought from two banks, the Commerz and Trust and the Bank of Kathmandu, based on the old customs duty rate,” said Mani Ratna Shakya, president of the Fenegosida. He added that dealers had not bought the metal, as many banks wanted to trade based on the new customs fee.

However; Anal Bhattarai, CEO of the Commerz and Trust Bank said that even as they were selling gold as per the old customs duty rate, dealers were not approaching them as expected. While the banks are finding it hard to find buyers, the domestic market is consuming around over 15 kg of fresh gold per day. A source said that traders were being supplied the gold through informal channels at a comparatively cheaper rate. “If you have money, the metal imported illegally comes to your door step at a relatively cheaper price, and this is how the market is being operated in recent times,” the source added Going by the Nepal Rastra Bank directives, gold dealers’ associations have to issue recommendations to the banks involved in importing gold to release the gold to the individual dealers specified. With the price touching a record high Rs 54,270 three weeks ago, customers sold their jewelleries rather than buying it, which resulted in a slowdown in the demand of fresh gold .

After a hike in the customs duty of Rs 1,600 per 10 gm, the government recently increased the import quota to 20 kg per day, up from 15 kg a day, focusing on festivals and the upcoming wedding season. As per the dealers, even though the government hiked the duty, it was not being added in the current pricing as new orders from the banks are yet to reach the market.

So far, only the NIC Asia bank is reported to have procured 50 kg of gold after the implementation of the new duty fee. The government has permitted over two dozen banks to import gold on a rotation basis.

Source: The Kathmandu Post