Nepal Rastra Bank to amending gold guideline

The Nepal Rastra Bank (NRB) is preparing to recommend the Ministry of Commerce and Supplies to review the guideline on gold and silver management. The revision is targeted at simplifying the existing gold distribution provision. The guideline introduced on Dec. 27, 2010 has allowed commercial banks to import 15 kg of gold per day and release it in the domestic market.

However, only few traders approached to designated commercial banks to buy gold. After the implementation of the guideline, three commercial banks have imported 150 kg of gold so far. Of the quantity, only 60 kg has been procured by traders. "We will soon recommend the Ministry of Commerce and Supplies to review the guideline," said Chinta Mani Shiwakoti, director at the Foreign Exchange Department of NRB. He said the NRB will soon hold a meeting with ministry officials in this regard.

Recently, the NRB had held a discussion with traders and bankers regarding import of the yellow metal and its distribution in the market. In the meeting, traders had strongly demanded revision of the guideline, saying it was `impractical'. It has been more than a month since the government implemented the new guideline. However, only 2-4 kg of gold is sold from banks per day. Currently, the gold demand is around is 25-30 kg per day and gold imported illegally from India fulfills a large portion of the demand.

Tej Ranta Shakya, president of Nepal Gold and Silver Dealers Association, said although gold brought from India is expensive by some Rs 300 per 10 gm, traders opt for Indian gold as there are no hassles in acquiring it. "Over the last month, we only recommended for 15 kg of gold," he added. A total of 16 commercial banks are listed by the Nepal Bankers' Association to import gold. With low response from traders, only three banks¿NIC, Bank of Kathmandu and Laxmi¿have imported 50 kg of gold each as of Feb. 8.

"Demand from traders is low," said Saroj Guragain, head of the Financial Market and Commodities division of NIC Bank. He said traders are reluctant to procure the yellow metal from banks. Due to low sales, banks are also facing the burden of increasing holding cost of gold. Therefore, many banks are not interested in importing gold. As per the guideline, commercial banks can sell 1 kg of gold at a time. But traders said small traders are finding it difficult as their requirements are low. The provision to submit the details of at least 50 percent of gold bought earlier to buy new gold is also not practical, they said.

"The guideline was targeted for small traders. However, from the looks of things, it has only helped big traders," said Shakya. He said the government should make a provision that allows banks to sell gold to wholesalers too, so that they could distribute gold to small traders.

Source:
myrepublica