Banks Not to Give Loans for Purchase of Gold: RBI

The Reserve Bank of India (RBI) has directed banks not to give loans to people for buying gold. In its notification, it asked banks not to grant advances against gold bullion to dealers or traders in gold. The move aims prevent people from indulging in speculative activities.

Banks are, however, allowed to provide loans for working capital requirement of gold jewellers. The decision to ban by RBI was taken to reduce the rise in imports of gold which recorded 969 metric tons up from 958 tons in 2010. This is, in turn, putting pressure on India’s current account deficit.

In the April-June quarter of 2012, gold imports had contracted year-on-year to Rs 71,912 crores by 18.4%. Other than working capital finance, banks are not permitted to give loans for the purchase of gold in any form.