Updated as of 9th Jul, 2004 

Attention of Authorised Dealers (ADs) is also invited to A.P. (DIR Series) Circular No. 25 dated October 1, 2003 in which ADs were advised that Letter of Credit (LC) for import of gold under the Nominated Agency Scheme must be established on behalf of the Nominated Agencies themselves and under no circumstances should the LC be issued on behalf of any other entity, even if a letter of authority issued by the Nominated Agency is furnished by these entities.

The Ministry of Commerce & Industry has since clarified that as per para 6.2 (b) of the EXIM Policy 2002-2007, Export Oriented Units (EOUs) in the Gem & Jewellery sector, are permitted to import gold directly. These units can also source gold through the existing nominated agencies, in terms of para 6.2 (g) of the policy. Further, units in Special Economic Zones (SEZs) in the gems and jewellery sector can also import gold as per the EXIM Policy 2002-2007. Accordingly, as per the extant guidelines in force, only nominated agencies, approved banks and EOUs/SEZ units in gems and jewellery sector can directly import gold.

ADs can therefore open Letters of Credit and allow remittances on behalf of EOUs, units in SEZs in the Gem & Jewellery sector and nominated agencies, for direct import of gold, subject to the following conditions:

        i.       The import of gold should be strictly in accordance with the EXIM Policy.

       ii.       Suppliers’ and Buyers’ Credit, including the usance period of LCs opened for direct import of gold should not exceed 90 days.

      iii.      Bankers' prudence should be strictly exercised for all transactions pertaining to import of gold. ADs should ensure that due diligence is undertaken and all Know-Your-Customer (KYC) norms and the Anti-Money-Laundering guidelines, issued by DBOD, Reserve Bank (cf.DBOD.AML.BC.18/14.01.001/2002-03, Dated August 16, 2002), are adhered to while undertaking such transactions. Any large or abnormal increase in the volume of business of the importer should be closely examined to ensure that the transactions are bonafide trade transactions. ADs should closely monitor such transactions in addition to carrying out the normal due diligence exercise. The credentials of the supplier should also be ascertained before opening of LCs. The financial standing, line of business and the net worth of the importer customer should be commensurate with the volume of business turnover. Apart from the above, in case of such transactions banks should also make discreet enquiries from other banks to assess the actual position. Further, in order to establish audit trail of import/export transactions, all documents pertaining to such transactions must be preserved for at least five years.

     iv.      ADs should follow up submission of the Bill of Entry by the importers as instructed in our A.P.(DIR Series) Circular No.9, dated August 18, 2003.

Head Offices/IBDs, of ADs undertaking gold import transactions are required to submit a monthly statement thereof, as per the format enclosed in the Annex, to the Trade Division, Foreign Exchange Department, Central Office, Reserve Bank of India, Shaheed Bhagat Singh Marg, Fort, Mumbai. The statement should be submitted within ten days of the following month. The statement should also be submitted by e-mail at the following e-mail ID tradedivisionimport@rbi.org.in .

These guidelines are issued from the foreign exchange angle only under the provisions of FEMA, 1999 and should not be construed to convey the approval by any other statutory authority or Government under any other existing laws/regulations. If further approval or permission is required from any other regulatory authority or Government under the relevant laws/regulations, the concerned entity should take the approval of the agency concerned before effecting the transaction.