Gold piles up in banks as smuggling grows
KATHMANDU:
Over 450 kg of gold lie idle in the vaults of commercial banks, as gold and jewellery dealers increasingly turn to the informal market to buy the yellow metal owing to cheaper rates, easy availability and less legal hassles in terms of tax returns.
While both the bankers and federations of gold and silver entrepreneurs are worried, the former are more anxious as the gold piled up in the banks’ vaults is hurting them most by increasing the insurance cost and a large chunk of investment remaining idle.
To overcome the current problem, bankers have requested Nepal Rastra Bank to allow them to sell gold directly to gold dealers by reviewing the existing provision, which mandates recommendation from respective federations.
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 for firms under their federations to manage the distribution and keep consumption at up to 15 kg per day.
“Nepal Bankers’ Association (NBA) has appealed to Nepal Rastra Bank to simplify gold import and distribution provision after receiving very low demand since April of this year,” said Rajan Singh Bhandari, president of NBA.
NBA has requested central bank to allow them to sell gold directly to dealers and shops if federation does not send any recommendation for a week.
“NBA will set a rotation policy among banks to sell gold directly to dealers if federations, who are authorised to recommend, don’t send any recommendation for a week,” Bhandari said, adding, “The banks’ investment in gold is not generating any returns and insurance cost is increasing with the yellow metal parked in their vaults.”
Bhandari also argued that if the central bank reviews the provision, buyers would be encouraged to buy gold from the formal channel. Banks are only allowed to import gold in limited quota of 15 kg per day. They import gold every two to three months on a rotation basis.
NBA President Bhandari said entrepreneurs are discouraged to buy gold from banks due to different conditions set by the different federations to recommend the quota for gold dealers and jewellery shops. Reportedly, federations charge high fees from buyers while recommending gold quota to the banks.
However, the federations refute such claims.
“It’s untrue that buyers are discouraged to buy gold from banks due to the recommendation fees of the federations,” Mani Ratna Shakya, president of Federation of Nepal Gold and Silver Dealers’ Association, said adding, “The rate fixed by banks is similar to the market rate set by the federation, which in turn encourages buyers to seek out the informal market.”
Shakya also stated that central bank’s Gold Import and Distribution Guideline-2011 clearly mentions that banks can only set a 0.5 per cent profit margin while selling gold to dealers.
Source: THT
