Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

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PUBLIC SECTOR UNDERTAKINGS
Public Sector Undertakings (PSU’s) are Indian Government enterprises. 4 are authorised to import gold
bullion.
• MMTC Limited
• PEC Ltd
• The HHEC of India Ltd
• The State Trading Corporation of India Limited (STC)
The gold-related activities of PSU’s are supervised by the Ministry of Commerce and Industry (not the Reserve Bank of
India). Like banks, they import and wholesale bullion to large domestic dealers. Unlike banks, they can loan imported
gold to domestic fabricators and retailers. They can also sell “unfixed” gold for a longer period, normally 11 calendar
days.
The PSU’s operate through 38 Gold Cell branches in 18 cities in 13 States. In 2001, they imported more than 100
tonnes.
BACKGROUND
Prior to the introduction of the OGL scheme in August 1997, nominated PSU’s had been allowed to import
gold for specified purposes.
HHEC has imported gold since 1982, MMTC (1989), STC (1997) and PEC (1998).
Initially, HHEC and MMTC (alongside the State Bank of India) were permitted to import gold bars, but only for re-export as
jewellery.
In 1994, however, the role of MMTC was expanded. In April, when the Special Import Licence (SIL) scheme enabled
authorised exporters to import part of their earnings in gold, MMTC was allowed to trade SIL’s and import bars to meet
requirements. In November, when an amendment to the NRI scheme allowed NRI’s to purchase up to 5 kg of gold
(subsequently raised to 10 kg in January 1997) within 15 days of their return to India, MMTC (and the State Bank of India)
established bonded warehouses in Mumbai and New Delhi to service requirements. The warehouses were subsequently
closed down in 1998 when NRI imports declined.
In 1997, when authorised banks were allowed to import gold for sale in the domestic market, PSU’s were also permitted to
do so.
ADVANTAGES OF PSU’S
As PSU’s are supervised by the Ministry of Commerce and Industry, they are able to offer gold-related
services that banks do not.
These services enable them to compete with banks that have the advantage of in-house access to favourable exchange rates,
interest rates and bank charges.
Notable PSU services include the following:
Imported gold can be loaned in the domestic market.
For the domestic market, banks can only loan gold accumulated through the Gold Deposit Scheme. PSU’s, however, have
been able to use imported gold for this purpose since 1998. For example, MMTC loans substantial quantities, mainly to
dealers for short periods (typically 30 days), against a bank guarantee of 110% of the value of gold loan. Annualised
interest is around 6%. Currently, the annual cumulative total of loans exceeds 70 tonnes.
Gold can be sold to domestic dealers on an “unfixed” price basis for a longer period.
While banks are restricted to offering their customers a maximum unfixed period of 5 calendar days, PSU’s are able to offer
an unfixed period of 11 calendar days, and sometimes more.
USANCE letters of credit are available.
Unlike banks, PSU’s are able to offer domestic dealers an opportunity to purchase gold on an unfixed price basis for up to
180 days through a deferred letter of credit. HHEC, PEC and STC offer this service.
AN INTRODUCTION TO THE INDIAN GOLD MARKET