The Indian government has a new ally in its campaign to curb gold imports. Reliance Capital, the financial services company owned by billionaire Anil Ambani, became the first company to suspend gold sales across all its businesses. It has also halted new subscriptions in its gold savings funds and stopped offering financing against gold as a security.
India is the world’s largest gold buyer, and demand has surged since international gold prices fell below $1,500 an ounce in April. Imports hit a record 162 tons (147 metric tons) in May, with net gold imports averaging $135 million a day.
The gold import surge worsened India’ current account deficit, which had hit a record 6.7% of GDP in the quarter that ended in December. The current account gap is one of the biggest overhangs on the rupee, which has fallen to record lows.
Concerned by the growing demand, the government doubled import duty on gold to 8%, but the measure was negated by the continued fall of gold prices. The central bank introduced measures to ban all purchases except with cash, a move that was directed specifically at the retail demand. Finance minister P Chidambaram even made a direct appeal to Indians to “resist the temptation to buy gold,” suggesting six months of abstinence could help the tackle the current account shortfall and weakness in the rupee.
The minister’s plea may have been ignored by consumers, but Reliance’s move could persuade other companies to follow suit.
More from Quartz