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BoI, PNB to resume gold trading in Ahmedabad

State-run Bank of India and Punjab National Bank say they plan to resume bullion trading in India's largest gold centre, Ahmedabad, after suspending dealings in March following a payments crisis

"We're in the process of beginning the bullion business afresh. It should happen in about a month," an official at the Bank of India's Ahmedabad office said.

The Bank of India and the Punjab National Bank suspended trading in bullion in March after being hit by a payments crisis involving a troubled co-operative bank.

A PNB official said the bank would also start dealing in bullion again in the next month.

The two banks along with the State Bank of India and Standard Chartered Bank suffered Rs 696 million in losses after pay orders issued by Ahmedabad-based Classic Co-operative bank on behalf of a leading trader bounced.

SBI, which was the largest importer-supplier of gold and silver in Gujarat, said it had not resumed bullion trading.

"We're now completely out of bullion business here (in Ahmedabad). A decision on restarting bullion trading has to be taken by management," said an SBI official who did not wish to be identified.

Unlike the other banks, Standard Chartered continued to deal in bullion following the payments crisis.

Other banks have also come into the market. State-run Corporation Bank, a leading gold importer, has resumed gold supply in the city after stopping more than a year ago due to low trading margins, a bank official said. Another new entrant is the Hong Kong and Shanghai Bank Corp, a spokesman said.

After the payment crisis rocked the bullion market, banks have become more cautious in their dealings with private traders, bank officials said.

"We deliver gold only after receiving confirmed payment," said the Corporation Bank official.

The Reserve Bank of India asked banks in April to release gold only against assured payment. The central bank allows over a dozen commercial banks and four state-run trading firms to import gold and trade the metal.

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