Govt to simplify gold distribution process

KATHMANDU:

Commercial banks may soon be able to sell gold directly to traders if private sector umbrella bodies fail to recommend names of buyers within 15 days of issuance of the sales notice by the banks.

The government is mulling over amending the Gold Import and Distribution Guideline-2011 to simplify the gold distribution process.

“The amended draft is under discussion with stakeholders,” said Jib Raj Koirala, joint secretary at the Ministry of Commerce and Supplies (MoCS) adding, “Gold distribution process will be more simplified if the proposed amendment receives approval.”

The existing provision of the guideline prevents 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.

The government decided to amend the guideline after receiving grievances from the banks and gold and jewellery dealers and Nepal Rastra Bank (NRB) recommended that the government review the distribution provision citing similar reasons.

“Bankers have long been complaining that buyers are encouraged to buy gold from the informal market due to

different conditions set by the respective federations,” a highly placed source at NRB requesting anonymity told The Himalayan Times, adding, “Gold is piling up in banks’ vaults since April as they have been getting nominal recommendations from different federations.”

He also stated that gold and jewellery dealers are also lured to buy gold from the informal market due to Rs 5,000 per kg recommendation fees charged by federations as well as less legal hassles in terms of tax returns when tapping into informal channels.

According to bankers, over 450 kg of gold is lying idle in the vaults of 30 commercial banks. The government officials have said that the government has been losing revenue as gold and jewellery dealers are tempted to turn to the informal market.

The central bank is authorised to set the limit for gold import quota, which is 15 kg per day.

Bankers have also said that buyers would not risk buying gold from the informal market if they could purchase gold easily.

“Following the amendment to the guideline, banks will sell gold on rotation basis as they have been doing while importing gold,” said Rajan Singh Bhandari, president of Nepal Bankers’ Association.

According to the existing provision, banks cannot sell more than one kg gold to a single buyer. “We have been seeking a proactive role of federations regarding issuing recommendations to firms without discrimination,” said Bhandari, adding, some dealers have complained of facing discrimination while federations issue the recommendations.

Bankers have also recommended government to reduce the facility of bringing 50 grams of gold in personal effect to discourage smuggling as well.

Source: THT