India has lifted letter of credit (L/C) restrictions on gold imports in favour of tougher measures to control flows of imports and exports of the precious metal.

The Reserve Bank of India (RBI) has now ordered nominated banks and agencies to re-export 20 per cent of every imported gold shipment.

Bonded warehouses

The RBI has said that the retained 20 per cent of shipments must be stored in bonded warehouses and no further imports will be allowed until at least 75 per cent of the warehoused gold has been re-exported.

Banks and agencies can only make gold available for domestic use to entities engaged in the jewellery business, according to the RBI order.

Deficit

Both the government and the central bank have been concentrating on bringing down gold imports over the past few months to tackle the ballooning current account deficit.

A previous measure introduced by the RBI obliged importers to put up 100 per cent cash collateral against L/Cs opened for gold imports, effectively meaning that importers could only buy gold on cash terms.

Welcome move

Gems and Jewellery Export Promotion Council chairman Vipul Shah has welcomed the RBI's latest move.

"This step will boost exports and foreign revenue. There will be no shortage of gold for domestic use," he told local media.

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