Indian Gold Book:Indian Gold Book - Gold Bars Worldwide
Indian Gold Book:Indian Gold Book - Gold Bars Worldwide
Indian Gold Book:Indian Gold Book - Gold Bars Worldwide
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72<br />
PUBLIC SECTOR UNDERTAKINGS<br />
Public Sector Undertakings (PSU’s) are <strong>Indian</strong> Government enterprises. 4 are authorised to import gold<br />
bullion.<br />
• MMTC Limited<br />
• PEC Ltd<br />
• The HHEC of India Ltd<br />
• The State Trading Corporation of India Limited (STC)<br />
The gold-related activities of PSU’s are supervised by the Ministry of Commerce and Industry (not the Reserve Bank of<br />
India). Like banks, they import and wholesale bullion to large domestic dealers. Unlike banks, they can loan imported<br />
gold to domestic fabricators and retailers. They can also sell “unfixed” gold for a longer period, normally 11 calendar<br />
days.<br />
The PSU’s operate through 38 <strong>Gold</strong> Cell branches in 18 cities in 13 States. In 2001, they imported more than 100<br />
tonnes.<br />
BACKGROUND<br />
Prior to the introduction of the OGL scheme in August 1997, nominated PSU’s had been allowed to import<br />
gold for specified purposes.<br />
HHEC has imported gold since 1982, MMTC (1989), STC (1997) and PEC (1998).<br />
Initially, HHEC and MMTC (alongside the State Bank of India) were permitted to import gold bars, but only for re-export as<br />
jewellery.<br />
In 1994, however, the role of MMTC was expanded. In April, when the Special Import Licence (SIL) scheme enabled<br />
authorised exporters to import part of their earnings in gold, MMTC was allowed to trade SIL’s and import bars to meet<br />
requirements. In November, when an amendment to the NRI scheme allowed NRI’s to purchase up to 5 kg of gold<br />
(subsequently raised to 10 kg in January 1997) within 15 days of their return to India, MMTC (and the State Bank of India)<br />
established bonded warehouses in Mumbai and New Delhi to service requirements. The warehouses were subsequently<br />
closed down in 1998 when NRI imports declined.<br />
In 1997, when authorised banks were allowed to import gold for sale in the domestic market, PSU’s were also permitted to<br />
do so.<br />
ADVANTAGES OF PSU’S<br />
As PSU’s are supervised by the Ministry of Commerce and Industry, they are able to offer gold-related<br />
services that banks do not.<br />
These services enable them to compete with banks that have the advantage of in-house access to favourable exchange rates,<br />
interest rates and bank charges.<br />
Notable PSU services include the following:<br />
Imported gold can be loaned in the domestic market.<br />
For the domestic market, banks can only loan gold accumulated through the <strong>Gold</strong> Deposit Scheme. PSU’s, however, have<br />
been able to use imported gold for this purpose since 1998. For example, MMTC loans substantial quantities, mainly to<br />
dealers for short periods (typically 30 days), against a bank guarantee of 110% of the value of gold loan. Annualised<br />
interest is around 6%. Currently, the annual cumulative total of loans exceeds 70 tonnes.<br />
<strong>Gold</strong> can be sold to domestic dealers on an “unfixed” price basis for a longer period.<br />
While banks are restricted to offering their customers a maximum unfixed period of 5 calendar days, PSU’s are able to offer<br />
an unfixed period of 11 calendar days, and sometimes more.<br />
USANCE letters of credit are available.<br />
Unlike banks, PSU’s are able to offer domestic dealers an opportunity to purchase gold on an unfixed price basis for up to<br />
180 days through a deferred letter of credit. HHEC, PEC and STC offer this service.<br />
AN INTRODUCTION TO THE INDIAN GOLD MARKET