RBI seeks to discourage aggressive gold coin selling by banks

The Reserve Bank of India is seeking to discourage commercial banks from offering to sell gold coins to customers; a practice that has become common over the years since the 2009 financial meltdown.

Duruvvi Subbarao, governor of the central bank, told newspersons in Pune today that the RBI would not prevent the sale of gold coins, but suggested that banks should refrain from marketing them aggressively.

"We do not want banks to aggressively market gold. We do not want that to become a business," Subbarao told reporters on the sidelines of a financial inclusion conference in Maharashtra's second-biggest city.

Subbarao stopped short of saying that banks are taking advantage of gullible small investors – but as a businessperson pointed out, it makes no sense to buy gold coins from banks as they are always priced a shade above what you can get from your family jeweller.

India's financial planners are of course more concerned about stopping the 'Indian gold rush' so that the money can be invested in production and infrastructure.

The RBI on Tuesday imposed restrictions on banks and non-banking finance companies (NBFCs) in providing loans against gold coins as well as units of gold ETFs and mutual funds.

Subbarao acknowledged that the route of buying gold for savings purposes should be open, but emphasised that investment in the financial sector is good for the economy.

He noted that the attractiveness of gold is a "consequence of high inflation".