Govt Seeks Gold Loan Details From Banks, Signals Possible Bullion Measures

The finance ministry has sought detailed information from banks on gold-related lending activities since 2023, triggering speculation that the government may be considering additional measures to curb gold imports and manage pressure on India's external balances.

According to an Economic Times report, the Department of Financial Services (DFS) on Friday asked banks to furnish data on gold metal loans (GMLs) and loans against gold, including the value and quantity of loans, number of customers, international suppliers and collateral details.

Banks were reportedly asked to submit the information by Monday, with some lenders providing month-wise data.

The move comes weeks after the government raised gold import duty to 15% and tightened norms around silver imports amid concerns over rising imports and pressure on the current account deficit.

Focus On Gold Metal Loans

Gold metal loans allow banks to borrow gold from international bullion banks and lend it to jewellers and exporters.

The facility, introduced in 1998, enables jewellers to procure gold without making immediate cash purchases and helps manage working capital requirements.

Industry sources told ET that shortly before the finance ministry's communication, the Reserve Bank of India (RBI) had also asked banks to estimate their GML exposure for the current year.

The country's major bullion-importing banks typically source gold from overseas suppliers through direct borrowing arrangements or consignment models linked to domestic demand.

Industry Suggests Alternatives

The latest move has prompted discussions within the bullion industry on possible policy changes aimed at reducing dependence on imported gold.

According to industry participants, one proposal under consideration is allowing banks to lend gold refined domestically from dore imports instead of relying entirely on imported refined gold.

Dore gold, an impure form of the metal, is processed by domestic refineries before being sold into the market.

Industry representatives have also suggested that gold exchange-traded funds (ETFs) source refined dore bars rather than imported bullion, potentially reducing overall import requirements.

Export Flexibility Proposed

Another proposal discussed with regulators involves permitting exports of surplus gold during periods of weak domestic demand.

Industry representatives argue that allowing excess inventories to be exported to markets such as China and Turkey could help reduce pressure on the rupee and improve the current account balance.

Currently, banks can return excess gold to foreign bullion suppliers, but broader export flexibility is not available.

Gold Imports At Record High

The discussions come despite a decline in physical gold imports in May.

India's gold imports surged 24% to a record $71.9 billion during FY26, although the quantity imported at 721 tonnes was lower than the previous year's level.

Several additional proposals have also reportedly been discussed across industry forums, including restrictions on cash purchases of gold, increased recycling of household gold holdings, mandatory allocation of a portion of imported gold to exporters and a review of the existing consignment import mechanism.

Industry participants said banks have also shared data on dore imports and related remittances with authorities.

Meanwhile, changes to GST treatment on gold imports have added uncertainty for some exporters after exemptions on upfront GST payments were not extended beyond May.