Nepal Rastra Bank (NRB) has ramped up the gold import quota for commercial banks to 20 kg with the onset of the festive season when demand for the precious metal soars to make jewellery.

The central bank said Tuesday that the import quota had been increased for two months due to high pressure from bullion traders with demand outstripping supply. Earlier, commercial banks were allowed to import 15 kg of gold daily. 

Bullion traders said the hike in the import quota would help to meet market demand which stands at around 40-50 kg daily. The four major sources of gold for the domestic market are commercial banks, smuggled stocks, recycled jewellery and duty-free import by individuals (50 gm per person). Only commercial banks are allowed to import the precious metal. 

Meanwhile, customers have been thronging gold shops to buy gold to make jewellery with bullion prices sliding to record lows lately. The start of the festive season has also fuelled demand, said traders. 

“We have increased the import quota by 5 kg per day due to the increased demand with the onset of the festive season,” said Bhisma Raj Dhungana, executive director of NRB, adding that they could consider raising the quota further if needed. 

However, commercial banks have not fully utilised the import quota citing low demand from traders. In the last fiscal year, the banks imported only 1,700 kg of gold (average 5 kg per day). After they stopped importing gold for some days from the beginning of this fiscal year, the market witnessed a shortage. The shortage in the market has encouraged illegal traders. The government had slashed the customs duty on gold to curb smuggling. 

Tej Ratna Shakya, special member of the Federation of Nepal Gold and Silver Dealers Association (Fenegosida), said that the import quota was still insufficient to meet demand. “We have demanded at least 30 kg per day during the festive and marriage seasons as the low quota encourages black marketers. But NRB raised the quota to 20 kg only for two months,” he said, adding that the market could witness a further shortage of gold. 

Meanwhile, some traders said that the gold distribution system was “unfair”. Banks sell gold to traders only after they produce recommendation letters from three organisations: Fenegosida, Nepal Gold and Silver Jewellery Federation and Handicrafts Association of Nepal. 

“Many small traders in the valley and other districts have to struggle to buy gold even if banks have enough stocks,” said Ramesh Shrestha, president of the Nepal Gold and Silver Jewellery Federation, adding that there should be a single system of distribution in the country.