India's gold import bill rose 24% to a record $71.9 billion in 2025-26 even as import volume fell to 721 tonnes from the previous year, according to a report by Business Today. In a move that may signal upcoming restrictions on gold, the Finance Ministry has directed bullion-importing banks to furnish detailed information on gold metal loans (GMLs) and loans backed by gold from 2023 onwards.
Data Request to Banks
The Department of Financial Services (DFS) sent a communication to banks on Friday evening, according to two people familiar with the matter. The information requested includes:
- Value and volume of gold metal loans
- Customer counts
- International gold suppliers
- Portfolio sizes
- Collateral amounts
- Number of borrowers
Banks were asked to submit the data by Monday, with some providing month-wise figures. A senior banker told ET, "Following the increase in import duty on gold to 15%, restoring it to pre-July 2024 levels, and the subsequent restrictions on silver imports, there is a view that further steps could be announced soon." The person added that June and July are typically slow months for gold demand, and with imports having declined in May, the current period may be suitable for examining policy options.
Gold Metal Loans and Import Dynamics
Gold metal loans, introduced in 1998 for exporters and later extended to jewellers, were briefly suspended for a month in 2013. The dozen banks involved in gold imports either borrow gold from international lenders and extend it to jewellers through GMLs, or procure the metal from overseas banks under a consignment arrangement, making outright payments based on confirmed demand from domestic wholesale buyers.
Another person familiar with the matter said the Reserve Bank of India (RBI) had recently asked banks to estimate their gold metal loan exposure for the current year before the finance ministry's communication was issued.
Industry Proposals to Moderate Imports
Industry participants said a bullion trade body has proposed that banks use gold bars refined from dore (unrefined gold) instead of importing fresh gold for issuing GMLs to jewellers. "Once the refining process is complete, the gold can be supplied through GMLs. Similarly, gold exchange-traded funds (ETFs) could purchase bars refined from dore rather than imported gold, which would help reduce import dependence," an industry executive said. Recently, four mutual fund houses placed restrictions on subscriptions to gold-linked schemes.
During a meeting with the RBI on Monday, industry representatives also raised the possibility of permitting gold exports under specific conditions. "When domestic demand is weak and discounts are significant, some flexibility could be provided to export unsold gold to consuming markets such as China and Turkey. At present, banks can return surplus gold to overseas bullion suppliers like JP Morgan and Standard Chartered, but a broader export framework could help ease pressure on both the rupee and the current account deficit," a source said.
Other proposals floated across different forums include:
- Restricting cash purchases of gold
- Creating a mechanism to channel household bullion holdings into the system by lending them to jewellers through structures similar to GMLs
- Reserving a portion of imported gold for exporters on the lines of the 2013 80:20 scheme
- Reviewing the existing consignment model
Trade Finance and Business Implications
For CFOs and treasury professionals, the potential tightening of gold imports and GML regulations could increase the cost of capital for jewellery exporters and domestic manufacturers who rely on these loans for working capital. The record gold import bill, despite lower volumes, highlights price-driven pressure on India's current account deficit. If the government implements measures such as restricting cash purchases or channeling household gold, liquidity in the gold lending market may shift, affecting trade finance availability. The rise in import duty to 15% has already increased the cost of imported gold; further steps could raise hedging costs for importers. Banks and bullion traders should monitor regulatory developments closely, as any new rules could alter supply chains and loan structures.
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