MUMBAI: The government and the Reserve Bank of India have given banks a free hand to import gold.In a move that could increase gold supply, nominated banks have been allowed to import gold on “consignment basis“ and lend it to local jewellers. Under this system, banks source or borrow gold from international bullion banks and lend the yellow metal to domestic jewellers. The borrowing and the lending rates are fixed simultaneously. It not only enables banks to earn good margin, but also ensures supply to the domestic market.For about 15 years till 2014, this was the customary practice of sourcing gold officially. However, this was stopped last year amid concerns that rising gold import could impact the current account deficit . But, following rampant gold smuggling due to the curbs imposed by the government to deter imports and representations by bodies like the Ficci sub-committee on jewellery, the government has now taken a relook at the policy. Banks have been borrowing gold from the international banks at 0.5% and lending it to Indian exporters at 4-6%.Ficci has pointed out that gold metal loan facility provided by authorised bullion banks provides a natural hedge against both currency as well as the commodity price fluctuation. This helps both the banks and the borrower.In the same notification, the RBI has also clarified that the obligation to export under the 20:80 scheme will continue to apply for unutilised gold imported before November 28, 2014. Under the scheme, aimed at curbing the import of gold, 20% of the imported gold had to be exported before buying new gold. The RBI scraped the rule in November 2014.