Page 28 - Bullion world volume 4 issue 6 june 2024

Bullion World | Volume 4 | Issue 6 | June 2024

Evolution of Reforms in Indian Bullion

Industry and Role of Nominated banks

Mahendran K, Country Head- Precious Metals Division, Karur Vysya Bank

India currently being the second major consumer of
gold in the world, has always had a yearning for the
yellow metal. It is much cherished fact that Gold has
an unstinted attachment with the people of our country
cutting across people, age and beliefs. In time, this
precious metal has catapulted itself into the chambers of
policies and governance. India has seen the formulation
of numerous committees and groups at various levels to
study the practical involvement of gold in the financial
system.

History and Evolution:
Over the years, we have seen the gradual transition
in the regulatory framework to moderate the bullion
ecosystem– being price sensitive and impactful. These
transitions can be traced when Bullion imports and
exports were banned under the Foreign Exchange
Regulation Act and gold production was controlled
by the Mysore Government in November 1956. The
proportional reserve system was replaced by the
minimum reserve system, for purposes of note issue.
Mr Mahendran K A glimpse of few other transitions the industry had
undergone are given hereunder:

• Issue of 15-year Gold Bonds at 6.5 per cent was
made in November 1962.
• Commercial banks were advised to consider
recalling loans made against the security of gold
and asking public to refrain from buying gold and to

The phenomenal growth that India is witnessing today surrender their holdings to the government.
can be traced to the progressive reforms our country has • Forward trading in gold was banned in November
made since Independence. In a country like ours, with 1962.
its growing population & diverse characteristics, Sound • In January 1963, The Gold Control Rules prohibited
reforms form the basis for sustainable growth and much manufacturing of gold ornaments of more than 14
needed to shape the growth trajectory in a controlled carat purity.
and requisite manner. • In March, 1965 a new series of 7 per cent Gold
Bonds 1980 was issued.
The role GOLD plays in the world economy, bolsters its • In October 1965, third series of gold bonds -
title as a “Safe Haven” in times of trouble. Due to such National Defence Gold Bonds, 1980 at 6.5 per cent
significance, absence of policies revolving around gold, was issued.
has its effect on the country’s economy. • In 1966, the rules were amended to manufacture

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