The Federation of Gold and Silver Dealers’ Association (Fenegosida) has criticised commercial banks for not importing smaller unit gold bars despite getting the green signal from the government. Their reluctance to do so has prevented small traders from buying bullion from banks, the federation said.

Fenegosida President Mani Ratna Shakya said the unwillingness of banks to sell gold bullion in small amounts had created problems mainly for small jewellery shops.

“The policy has forced them to buy gold from the local market to make jewellery for their customers,” said Shakya, speaking at Fenegosida’s fourth annual general meeting.

Two months ago, the Commerce Ministry relaxed restrictions and allowed banks to import smaller gold bars weighing up to 100 gm.

The idea was to enable bullion traders to buy only as much as they needed and free them from having to team up to buy a large unit and split it among themselves. However, banks are still selling gold bars weighing 1 kg.

Nepal Rastra Bank (NRB) said that banks were not importing smaller unit bars as they had unsold stock. “Banks have reported that they have excess stocks of gold bullion as traders have not been buying gold from them,” said Chinamani Siwakoti, deputy governor of NRB.

Siwakoti said he suspected traders were buying gold bullion from illegal importers. “Traders have not been buying gold bullion imported by banks, but they have been urging the government to increase the import quota,” he said. “The mismatch between demand and supply has raised suspicions of smuggling.”

The central bank has also suspected that illegal traders might be holding large amounts of 500- and 1,000-rupee Indian banknotes that have been recently banned by the Indian government.

“We have received reports that these traders possess large stashes of the banned Indian currency notes,” said the NRB deputy governor.

Pashupati Murarka, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said increasing the quota of gold imports and allowing individuals to import gold could help check smuggling.

According to him, Nepali traders are forced to keep large amounts of high-denomination Indian banknotes to carry out their daily transactions which they do mainly with Indian traders.

Meanwhile, Fenegosida has urged the government to enforce the directive related to gold and silver jewellery soon. The directive deals with trading, purity and inspection procedures in the gold market.

Bullion traders also said that commercial banks should sell gold from their branches outside the Kathmandu Valley.