Banks have approached the Reserve Bank of India seeking a policy framework for silver metal loans on the lines of the existing gold metal loans for borrowers. In the last one year, silver exports have gone up around 16 per cent.
Sources quoted in a report in The Economic Times said with the growth in silver exports in the last one year, jewellery manufacturers in India have been asking banks to extend credit for the procurement of silver, silver articles, and jewellery manufacturing.
The banks have decided to raise this issue with the Reserve Bank of India in a meeting last month,” the source said.
The source added that silver exports had touched around Rs 25,000 crore and there was a huge demand for credit from this sector.
Silver is a precious metal that has the most usage in the industrial sector and hence it gets affected by trends in both gold and industrial metals. As many countries are rapidly moving towards a greener economy, investments in decarbonisation and electrification projects will continue to grow in the next few years.
Under existing RBI rules for gold, nominated banks are authorised to import gold. The designated banks, who are a part of the Gold Monetisation Scheme, 2015, can extend gold (metal) loans (GML) to jewellery exporters or domestic manufacturers of gold jewellery.
Herein, the loans are repaid in rupees, which is equivalent to the value of the gold borrowed. Banks can provide the borrower with the option to repay a part of the loan in the form of physical gold in lots of one kg or more.
Talking about silver metal and jewellery manufacturing, a bank executive told ET that silver jewellery manufacturing has similar price and operational risks just like gold jewellery during the manufacturing or operation cycle.
He added that guidelines by the central bank will ensure that there are no violations of existing regulations by the manufacturers and traders.
Gem Jewellery Export Promotion Council’s (GJEPC) latest data shows that exports of silver jewellery grew 16.02 per cent during FY23 to Rs 23,492.71 crore, compared to Rs 20,248.09 crore in the previous year.
Earlier in the year, the Silver Institute stated the global silver demand is expected to reach a new high of 1.21 billion ounces in 2022, up by 16 per cent from 2021. The global silver market is forecasted to record a second consecutive deficit this year.
In the last 10 years, the supply deficit for silver has been gradually widening but in 2022 it experienced a sudden spike in a deficit of over 300 per cent from 2021 leading to increased bullishness.
Besides, the demand for silver is expected to increase significantly due to its application in the circuits and interiors of electric vehicles.
“Going forward, China’s reopening, Fed stance, and global growth are going to be the key drivers of the silver prices. The demand outlook for silver remains solid amid the global green energy push, boosting the industrial demand,” Ravindra V. Rao, CMT, EPAT VP-Head Commodity Research, Kotak Securities Ltd, said at the beginning of the year.
