RBI eased gold import norms under 20:80 Scheme

The Reserve Bank of India (RBI) on 21 May 2014 eased the gold import norms under the 20: 80 Scheme.

Under the 20:80 Scheme, Star trading houses and premier trading houses, which are registered as nominated agencies by the Directorate General of Foreign Trade (DGFT) now can import gold.

With this move the number of institutions which imports gold will go up and will increase supply of gold. Besides, it will also lead to fall in the prices of gold.

The RBI had imposed severe restrictions on gold imports to combat the Current Account Deficit (CAD) and sliding rupee in July 2014. RBI prescribed a 20:80 formula, which tied imports with exports of gold.

Under the 20:80 Scheme, an importer has to ensure that at least 20 percent of every lot of imported gold is exclusively made available for exports as finished good and the balance for domestic use. The facility was available to the selected banks only and other entities were barred from imports of gold.