Nepal Rastra Bank (NRB) has asked the Commerce Ministry to allow banks to import smaller units of gold as they have been left with a huge quantity of unsold stock.

Banks have been importing 1-kilo gold bars, but bullion traders want smaller units as they can’t buy 1 kg of gold at one time. A 1-kilo gold bar cost Rs5.05 million in Kathmandu’s bullion market on Monday.

According to traders, this is one of the reasons why banks have been left with piles of unsold bullion, although cheaper smuggled gold has largely been blamed for this situation.

Nepali banks currently have nearly 400 kg of unsold gold in their vaults, said the central bank. NRB has issued permits to 12 commercial banks to import up to 15 kg of gold daily.

NRB Executive Director Bhisma Raj Dhungana said they wrote to the Commerce Ministry two months ago to allow banks to import gold in smaller units. “As banks are left with a huge quantity of unsold stock, making gold available in small units is expected to encourage small gold traders to buy gold from them,” he said.

Dhungana said banks now have 371 kg of gold in stock. According to him, they have been left with this massive stock as traders weren’t interested in buying large units of bullion. Despite the central bank’s claim, Commerce Ministry officials said they were not aware of the situation. In 2009, NRB introduced a quota system for bullion following a balance of payments crisis due to money flowing out of the country to pay for gold imports. Traders have been asking the government to scrap the quota system.

Tej Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers’ Associations, said they had also been pleading with the government to permit banks to import small units of gold. According to him, they want 100 gm gold bars.

“If the provision is enforced, it will allow mainly small traders to buy gold individually,” said Shakya. He added that traders had been forming groups to buy gold jointly from banks because a 1-kilo unit is too large for them individually.

According to traders, demand for the yellow metal has dropped in recent days. Soaring bullion prices, investors switching to stocks and the start of reconstruction work have been cited for the fall in demand.

“Due to these reasons, many people have been selling their jewellery to bullion traders,” Shakya said.