Banks face prolonged gold, silver import delays; domestic bullion prices rise: Report

Gold news: Banks have been unable to import gold and silver for nearly five weeks due to customs-related bottlenecks and uncertainty over tax treatment, creating supply concerns in the country’s bullion market and pushing domestic prices higher, according to traders cited by Bloomberg News.

The disruption, which began at the start of the new financial year on April 1, has stalled shipments at ports and airports across India. Market participants said the delays are unusually long and could tighten supplies in the world’s second-largest bullion consumer.

“The duration of the import halt is unusual. The situation is getting tighter,” Sunil Kashyap, managing director at bullion trader FinMet Pte Ltd, told Bloomberg News. He noted that jewellers are looking to replenish inventories after the Akshaya Tritiya festival, traditionally considered an auspicious period for buying gold and silver.

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India imports the majority of its bullion requirements, with banks, trading houses, and refiners accounting for a significant share of purchases. However, imports were initially affected after the trade ministry delayed publishing the annual list of banks authorised to import precious metals. Although the list was eventually issued on April 17, customs authorities are yet to release a separate operational clearance order needed for consignments to move through ports.

Traders also said there is a lack of clarity on whether imports of gold and silver will continue to remain exempt from the integrated goods and services tax (IGST). The uncertainty has further slowed transactions, according to Bloomberg News.

The import disruption comes at a time when international gold prices have corrected sharply. Gold prices have fallen nearly 12% since late February as rising inflation concerns and the possibility of higher interest rates reduced investor appetite for the non-yielding asset.

Global gold prices

Despite weaker global prices, domestic bullion premiums in India have risen because of constrained supply. According to the World Gold Council, the premium of domestic gold prices over international benchmarks crossed $20 per ounce this week for the first time since early February.

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The India International Bullion Exchange (IIBX), located in Gujarat International Finance Tec-City (GIFT City), has emerged as the only active route for bullion imports since April, traders said. Volumes on the exchange have surged, with April recording the highest daily trading activity in a year.

However, importing through the IIBX involves longer processing timelines and requires higher working capital commitments, traders added.

Economists believe the temporary slowdown in bullion imports may marginally support India’s external balances. Madhavi Arora, economist at Emkay Global Financial Services, told Bloomberg News that the disruption could be “mildly positive” for India’s trade balance and current account deficit for April, given that gold is among the country’s largest import categories after crude oil.

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