It is believed that the import of gold into India, which is the largest consumer of the metal in the world, would fall following a move by the central bank of the country place restrictions on the banks form purchasing gold form foreign markets.

The Reserve Bank of India (RBI) has placed the restriction on the banks with an aim to curb gold imports and reduce the large Current account deficit of the government. The RBI has said that the high CAD is the biggest risk to the Indian economy at present and hinted that if the worrying trend continues then the monetary policy might be reversed.

Banks will now be only allowed to import gold on a consignment basis to one meet the demand for exporters of gold jewelry, the central bank said in its annual monetary statement today. It said that the majority of the import by banks is on a consignment basis that does not require the banks to fund the purchases.

Bachhraj Bamalwa, a director and former chairman of the All India Gems & Jewellery Trade Federation said that the move would result in lesser import of gold into the country. The RBI pointed out that a total of 36 private and state-owned banks and companies are permitted to import gold into the country.