Indian banks won’t loan you money to buy gold as imports ‘surge’ 87%
Last week, we reported that if you live in India and you’d saved your money in Rupees this year, you are now down nearly 30% in terms of US dollars. However, if you did what pretty much all Indians have time for time-immemorial, and saved your hard earned cash in gold, you are now up 6% for 2013 – quite a difference.
We concluded the above article with the following:
So what do you think the average Indian looking at the plunge of his/her national currency of nearly 30% is going to think when he/she at the same time sees those who have saved in gold not only protect their purchasing power but increase it? The bullish case for gold in India seems incredibly strong when you look at it like that, and it also shouldn’t be forgotten that despite all the government’s efforts, the Indians are still the biggest buyers of gold on the planet.
And it is this massive buying that the Indian government has spent all year (unsuccessfully according to the World Gold Council) trying to halt.
Well, now it’s the turn of the banks in India to try and help their government out by manipulating the demand for gold lower themselves. They intend to do this by banning customers from borrowing money to buy gold:
New Delhi: With a view to curb appetite for gold, banks are sanctioning advances, including personal loans, only if borrowers agree not to use the proceeds to buy the metal beyond permitted levels.
It doesn’t get more explicit than that, the aim is to ‘curb the appetite for gold’.
And this clearly isn’t something that the Indian banks have cooked up themselves, they are being ‘directed’ to do so by India’s central bank (RBI) – showing just what a tangled-web the relationship between the banks and their central bank really is:
Banks have placed the condition that borrowers should not use even personal loans to buy gold, a senior official of a private sector bank said. The measures follow directions from the Reserve Bank of India to banks and NBFCs that are aimed at reining in demand for the yellow metal.
The Reserve Bank of India and the government have taken steps to curb demand for gold after imports of the metal widened the current account deficit. As per existing guidelines, no advances can be granted by banks for the purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold exchange traded funds and units of gold mutual funds.
And just to show what an utter failure the Indian government’s gold policy has been, here’s the latest import numbers from India:
After a dip in June, gold imports surged in July to 47 tonnes compared with 31 tonnes in the previous month. Import of gold in April-July rose 87 per cent to 383 tonnes.
Now you’ll hear that the reason that the Indian government hates gold so much is because of the negative effect it has on their current account deficit. Which seems to us to be the very limit-test of credulity – in other words, if you’ll believe that, you’ll believe anything.
It is much more likely that there is in fact a very real shortage of physical gold in the world, especially at the non-audited vaults of Western central banks – and to help their central-banking-brethren out in the West, the RBI has agreed to help alleviate that massive demand coming out of the biggest gold buying country in the planet, by using any and all means necessary.
Link to this article: : http://www.goldmadesimplenews.com/gold/indian-banks-wont-loan-you-money-to-buy-gold-as-imports-surge-87-11535/