Wednesday, November 21, 2012

RBI bans loans to buy gold

Yes you wouldn't want to make loans against something of true value who's price keeps pace or exceeds the inflation rate. Much better to make loans against items who's value is guaranteed to eventually fall to zero, like cars and furniture.

From The Times of India

Original source

MUMBAI: The Reserve Bank of India (RBI) on Monday notified a total ban on banks from advancing any loans to its customers for purchasing gold in any form, which includes primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds ( ETF) and units of gold mutual funds.

In its October 30 policy meet, the central bank had announced this decision. However, the banking regulator said that banks are allowed to give loans for "genuine working capital requirements to jewellers".

The notification was issued after it was found that there was a significant rise in the import of gold into India in recent years. The step by the central bank came on concerns that direct bank financing for the purchase of gold in any form — that is bullion, primary gold, jewellery , gold coin, etc — could lead to fuelling of demand for gold in the country.

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