Banks halt silver imports amid duty differential exploitation by private traders


New Delhi: Indian Bank have stopped silver import after private trader According to five dealers and industry officials, large quantities of the precious metal were purchased from the United Arab Emirates (UAE) to take advantage of the duty differential.
India, the world's largest silver consumer, imposed a 15% import duty on the metal. However, the Comprehensive Economic Partnership Agreement between India and the UAE in 2022 allows private traders to import silver. India International Bullion Exchange (IIBX) at a 9% fee, plus an additional 3% tax for value addition.
Established in 2022, IIBX became India's first international bullion exchange, with government approval to trade silver by mid-December the same year. A senior IIBX official said traders have imported 827 metric tonnes of silver through the IIBX platform this year.
In contrast, India imported 3,625 tonnes of silver in 2023. Lower import tax has allowed traders to offer imported silver through IIBX at a discount of around 2%, a Mumbai-based bullion dealer linked to a private bank revealed. Another bullion dealer said silver traded through the IIBX platform has seen a discount of about 1,700 Indian rupees ($20.52) per kilogram in recent weeks compared to the domestic benchmark price.
In the international market, silver is currently trading around $25 an ounce, close to its highest level this year, which is roughly in line with gold and influenced by fluctuations in the dollar. However, banks find themselves unable to offer discounts due to the 15% import tax imposed on silver. There has been a significant decline in demand, forcing banks to stop importing silver, dealers said.
Most of the banks have shifted their focus to gold instead of silver. The government had offered concessions on imports to ensure the viability of the newly launched IIBX. However, this practice has raised concerns about potential trade distortions and loss of import duty revenue for the government, a senior industry official highlighted.
Over the past two months, the UAE has emerged as the primary source of silver imports. Apart from UAE, India also imports silver from Britain, China, Russia and Switzerland.
(With Reuters inputs)

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *