From Mineweb.com,
The sale of gold coins in India by banks could be curbed with the Reserve Bank of India considering banning such sales. Partly, an attempt by the Reserve Bank to help curb rising gold imports, the Bank says it also believes such sales are not relevant to core banking operations.
The move, if implemented, could deal a major blow to banks that are estimated to make a clear profit of $26 million (Rs 1.5 billion) given the 3% margin from the sales of gold coins. Some 36 banks have been nominated by the apex bank to import gold into the country.
Gold is a regulated sector in India and the government allows state-run and private banks to trade in bullion at the wholesale and retail level. To profit from Indians love of gold, banks in India started vending gold coins four years ago, earning a small commission with each sale.
Though the practise did not catch the fancy of Indian customers in its early days, major discounts and monthly instalment programmes offered by banks during festivals and other auspicious days, including gold-buying days, have resulted in huge sales.
For Indian investors, gold coins in smaller denominations are considered apt for corporate gifting and rewards for contests or for commemorative giveaways. Banks have also been incentivising their staff to sell gold coins as they earn a margin of $2.62 (Rs 150) per gram of gold. Special edition gold coins with images of deities or monuments have also helped to drive the overall coin sales in the country.
The Indian government has been desperately looking for a scapegoat. This attempt to ban bank sales of gold coin is a follow-up to the earlier tariffs imposed on gold imports
Unfortunately the problem isn’t gold (or the Indian people), the problem is the government as I pointed out before.
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