Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

BANKS
IMPORTED BULLION PRODUCTS
Banks are permitted to import gold bullion cast or minted bars and medallions with a millesimal purity of not
less than 995.
The import of legal tender gold coins is prohibited. Almost all imports for the domestic market are in the form of 10 tola
(TT) bars. Kilobars are also imported, mainly for export jewellery fabricators.
Most imported gold bars are produced by 8 refining companies located in Australia, South Africa, Switzerland and the United
Kingdom.
INTERNATIONAL SUPPLIERS
Banks rely generally on 10 international gold dealers – members of the LBMA – as their suppliers of gold
bullion.
2 of the international dealers supply their bank branches in India directly, notably Bank of Nova Scotia and HSBC. 2 other
suppliers have active liaison offices in India, Mitsui & Co and Societe Generale.
4 of them own, part-own or are directly associated with refiners that manufacture large quantities of TT bars, notably
Commerzbank, Credit Suisse First Boston, MKS Finance and UBS Warburg.
Most banks are obliged to deal with several international dealers due to credit risk constraints. Some are also obliged to
import only TT bars whose refineries are accredited to the LBMA. A minimum order is usually 1,000 – 2,000 TT bars.
DEALING CONSTRAINTS
Due to exchange control regulations, banks are not able to export gold bullion, apart from some leeway
afforded to gold accumulated under the Gold Deposit Scheme.
Nor are they able to hedge their bullion imports.
As no bank is prepared to assume the risk of a fluctuating gold price in the absence of a hedging facility, all banks rely on
consignment stocks provided by international dealers. For the same reason, no bank is prepared to buy back bullion from
its customers.
In some States (e.g. Rajasthan), banks without a branch that is registered to receive and pay State sales taxes may not be
permitted to operate in that State.
CONSIGNMENT STOCKS
Most banks rely on consignment stocks located in cities around India.
Some banks will stock 5,000 – 10,000 TT bars or more in different locations. In major import centres, they will often have
consignment stocks from several dealers. As consignment stocks normally incur insurance costs and interest charges if not
sold within 14 days, and the replenishment of stocks can be done within 3 – 5 days, banks monitor their stocks closely.
Consignment stocks, held by the banks combined, can exceed 10 tonnes when high demand is anticipated.
10 banks were active importers in 2001.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 61