Finally the government has relented to the demand of the bullion industry. Gold will now be treated akin to foreign exchange (forex) currency and not just as an idle precious metal or commodity. Globally, gold is considered as forex and is part of bullion banks' forex dealings. The Reserve Bank of India (RBI) has decided to allow bullion banks to have one single open position limit for both gold and forex. The banks will however, have to get the board approval in this regard. Till recently, the RBI treated bullion banks' limits in both gold and forex separately. The RBI, in a statement on the on sale of gold/ silver/ platinum dated October 7, 2002, sent to all banks authorised to import these metals, said: "Banks (bullion banks) need to have a single open position limit for both gold and foreign exchange. Banks may operate within the aggregate of the open position limits for foreign exchange and gold already approved by us (the RBI). In case there is a need for enhancement in the common open position limit, banks may approach the department for approval of such enhanced limit. In terms of our extant instructions, the open position limit would carry 100 per cent risk weight." RBI's earlier circular dated March 4, 1998, advised these banks to lay down, with the approval of their boards, prudential limits on taking open position in gold and also to obtain the specific approval of the RBI for such limits.
NSTL
