The proposal also includes ETF integration and regulatory monitoring, while addressing pressure on the rupee to support the jewellery sector
Mumbai: Industry body All India Jewellers and Goldsmith Federation (AIJGF) has urged the Government to create a regulated bullion bank framework that would mobilize household and institutional gold, recycle domestic supplies into the economy and reduce pressure on imports and the rupee. The proposal was discussed during a meeting between Union Commerce and Industry Minister Piyush Goyal and representatives of the AIJGF, according to people familiar with the discussions.
The industry body urged the Government to create a formal framework under which domestic gold held by households, institutions and investment vehicles could be standardized, mobilized and lent back into the jewellery ecosystem, sources said.
“The Minister has agreed to consider setting up a consultation committee to examine the proposed bullion bank framework,” sources said. The committee, if formed, is expected to include representatives from the Government, jewellery industry, bullion market, financial institutions and regulators.
AIJGF, the jewellery arm associated with the Confederation of All India Traders, is likely to meet the Minister again within the next few days to further take the proposal forward.
The proposed bullion bank would function as a central institution through which domestic gold could be pooled, standardized, settled and lent. On the supply side would be households and institutional holders of gold, while jewellers, exporters, refiners and manufacturers would form the demand side.
The broader aim is to monetize what the industry describes as India’s stock of “idle gold” held by households and institutions, thereby lowering demand for imports of the metal.
The proposal comes at a time when India is facing pressure on its currency and foreign exchange reserves amid crude oil and gold prices.
Earlier this month, Prime Minister Narendra Modi urged citizens to defer gold purchases for a year to reduce pressure on the rupee and the country’s import bill. Industry executives, however, said that any slowdown in gold demand could affect the livelihoods of nearly 3.5 crore people dependent on India’s gold and jewellery ecosystem.
As part of the proposed framework, AIJGF suggested integrating gold exchange-traded funds with the bullion bank structure.According to the federation, Indian gold ETFs currently hold physical gold with custodians, much of which remains idle in vaults. Every incremental ETF inflow often creates demand for imported gold, adding to import pressures, it said.
The federation proposed allowing ETFs to lend 20-30% of their physical gold holdings through the regulated bullion bank framework. Such lending should be over-collateralized, insured, audited and marked to market daily, while tenors should remain short and risk-controlled, the industry body said.
To oversee the framework, AIJGF also proposed the creation of an inter-ministerial task force involving the Finance Ministry, Commerce Ministry and Ministry of Consumer Affairs, citing the need for coordinated regulation across multiple departments.
Retail Jeweller India News
