Buying gold in India has got a little more difficult for consumers used to using plastic money to buy large jewellery sets or heavy gold ornaments. India’s apex bank has asked banks not to convert gold purchases done through credit cards into equated monthly installments.

Continuing its fight against gold consumption, the Reserve Bank of India is leaving no stone unturned to discourage gold buyers in India. The ban on conversion of gold purchases at jewellery stores into equated monthly instalments for credit card purchases has already triggered a slump in sales.

“The central bank has asked banks to stop accepting credit card purchases for gold. We only realised this when customers who fished out their credit card for high value transactions at our stores could not carry through the order. In the last 48 hours, sales have dipped over 25%,” said Manmohan Gandhi, bullion retailer.

Typically, for sales over $1,652 (Rs 100,000), Indian consumers tend to convert gold purchases into equated monthly instalments (EMIs) of three months or six months. While this enables the consumer to enjoy the gold purchase for the entire duration of the EMI, it staggers the repayment for a longer duration.

However, the RBI’s directive has dealt a body blow to gold retailers in India, who have been banking on EMIs for almost all high value purchases. “How many people actually walk around with money to purchase a gold neck piece, which could cost upwards of $2000? The move has severely affected a majority of the population who bank on EMI schemes for gold purchases,” said Shombit Malan, manager at Mistry & Sons Jewellery House.

He added that sales have dipped over 15% at his store. The RBI has issued the directive as a policy measure not just to lower gold imports, but to curb retail consumption at its apex.

“Sales of expensive ornaments have completely stopped as a consequence. Jewellery sales are down by 10%. Besides, RBI has also mandated that cards should not be accepted for the purchase of gold coins,” said Pravin Shah, bullion retailer.

The Kerala Chamber of Commerce and Industry chairman K N Marzook termed the move totally unwarranted. “It curtails the freedom of a person. Though the government is promoting accountability in transactions, this is bound to promote the circulation of black (illegal) money in the system, With a credit card, there is more accountability,” he said.

Marzook added that in Kerala in South India, with around 22 kilo of gold sold on any given day, by way of ornaments or gold coins, sales have been drastically affected, since credit cards account for nearly 20% of daily sales in Kerala alone.

As jewellery outlet promoter Mahendra Dalal in Mumbai pointed out, “Banks have been curtailed from offering any form of credit for the purpose of buying gold. A credit card purchase allows for 45-50 days of credit to the consumer. With this, the RBI is only ensuring that more gold is not imported into the country and that people will finally resist from buying gold.”