The RBI eased tough gold import rules on Wednesday by allowing seven more private agencies to ship the precious metal, a move that industry officials say could augment supplies and reduce premiums in the peak wedding season.
Gold imports by India, the world's No. 2 bullion consumer after China, could quickly rise from current levels, according to the officials. This would help global prices, which slumped 28 percent last year, partly due to India's import curbs.
Struggling with a ballooning trade deficit, India in 2013 imposed a record high duty of 10 percent on overseas purchases of gold, the second-biggest item in its import bill, and introduced a rule tying import quantities to export levels.
On Wednesday, the Reserve Bank of India allowed "star trading houses", private jewellery exporters which had been barred from importing gold since July 2013, to resume imports, with immediate effect.
As a result, more than 20 entities, including state-run banks, private banks and agencies will now be allowed to import the metal.
"This is a welcome step as it is some sort of relaxation. Supplies will increase in another 8-10 days and premiums will certainly come down," said Bachhraj Bamalwa, director with All India Gems and Jewellery Trade Federation.
"Some gold that was routed through illegal channels will now be routed legally."
Legal monthly imports may soon increase by another 10-15 tonnes, from the current 20 tonnes, triggering a sharp correction in premiums to $40-50 an ounce on London prices from the current $90, he said. Premiums had hit a record of $160 an ounce in December last year.
The RBI also allowed banks to make gold loans to domestic jewellery makers, a practice that was stopped last year. Without the gold loans jewellers had been forced to take credit to fund purchases, adding to their costs.
"Gold metal loans are of great significance as they are expected to release the cost pressures, which all the jewellery retailers were facing," said Sudheesh Nambiath, India analyst, Thomson Reuters GFMS.
India's incoming prime minister, Narendra Modi, who led the opposition Bharatiya Janata Party (BJP) to a decisive victory in a just-concluded election, has indicated his willingness to remove gold curbs.
Modi will be sworn in on Monday and the plan to ease the curbs is ready for his government to take up.
"Once Modi is sworn in, we expect more relaxation on gold imports," said Bamalwa.