NEW DELHI: Premiums for imported gold in India halved from record levels last week, reflecting major volumes being channeled through banks, with a new import rule temporarily disrupted supplies to the world's largest gold consumer.
The central bank's recent move to tighten easy availability of credit for importers combined with a surge in bargain hunting in India since prices fell to two-year lows in mid-April had caused a supply shortage.
The supply squeeze had prompted importers to pay premiums of between $10 and $15 an ounce to international bullion suppliers to speed up deliveries.
The lower premiums will benefit Indian consumers, as the higher cost of imported gold is usually passed on to them. Most Indian consumers have been willingly paying the extra money, as their total cost was still far less than three months ago.
India's government allows gold imports only through a handful of designated state-run banks and a clutch of state-backed and private trade agencies.
Until two weeks back, companies could place gold import orders with one of the designated banks by paying a margin up front and the balance on delivery.
Subsequently, the Reserve Bank of India changed the rule, as easy availability of credit had encouraged speculative imports, leading to a larger outflow of dollars that has weighed on the local rupee currency.
The change had caused a temporary shortage, as importers took time to switch over to making upfront payments.
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