RBI and Gold

This statement that 'RBI wants you buy gold from banks, You will lose twice' does not seem to be correct.It is reported that RBI has not banned banks from issuing gold and this stand of RBI also does not stand justification in the present context of import of gold by banks widening the current account deficit.The RBI should have not only banned the banks from selling gold coins but also should have insisted the banks to buy back the gold at market prices. The risk in price fluctuations has to be borne by the investors.The banks have gone for Gold coins sale to make extra income which was perhaps a wrong policy permitted by the Reserve Bank and it could have been well avoided. The banks have imported heavily the Gold coins and they have no choice but to liquidate the stock through selling the coins to customers by hook or crook.The only solution available to RBI is to advise the banks to liquidate the imported gold coins at market prices and bear the loss or alternatively, RBI can also perhaps  purchase the stock at cost prices the banks have incurred and increase RBI stock.Making Customers to bear the burden of banks has to be avoided as they have already burned their fingers by purchasing coins from banks at a higher cost and they are forced to sell them in the market at a lower price.This is not in good taste and RBI could have avoided by permitting banks at the beginning itself to buy back gold.

Dr.T.V.Gopalakrishnan