KATHMANDU: The Auditor General's report has highlighted that despite the government's arrangements for importing and selling gold through commercial banks, a significant amount of gold is being supplied to the market via informal channels. The recently published 61st annual report of the Office of the Auditor General mentions that only 13% of the annual gold traded by dealers in New Road is sourced from banks.

The report states that an additional 20% of gold is supplied through mutual buying and selling, while 67% is purchased from individuals. However, the Auditor General’s report has criticized businessmen for not using banking channels for these purchases.

Similarly, the report of the Auditor General points out that transactions between three gold traders in Nepalgunj revealed that 61 to 83 percent of their total gold purchases were made within the same family.

Although the government has been controlling gold imports by setting quotas, the report indicates that a large amount of gold is entering the market through informal channels. Traders claim that the high influx of gold through informal channels is due to the government's failure to set import quotas according to market demand.

"Currently, there is a daily demand for 30 kg of gold in the domestic market of Nepal," said Mani Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers Association.

Nepalis returning from abroad can import up to 50 grams of gold. This policy aims to discourage the import of raw gold.

Shakya asserts that a significant amount of gold is brought into the country daily under the facilities provided by the government. However, the Department of Customs has not recorded the amount of gold imported under this facility provided to the individual travellers.

Currently, Nepal Rastra Bank has allowed commercial banks to import 20 kg of gold per day. Until last October, the import quota was only 10 kg per day.

In 2011, the government tasked the Nepal Rastra Bank with importing and selling gold after excessive imports affected foreign currency reserves and exchange rates. Subsequently, the central bank issued the Gold Import and Sale Distribution Procedure, 2011 (2068 BS), granting import rights exclusively to commercial banks.

Banks have also set quotas for the sale of imported gold. According to these quotas, 50 percent of the imports must be sold in the eight districts of the former Bagmati zone, with the remaining 50 percent must be sold in other districts. From the quota allocated for Bagmati zone, 50 percent is reserved for the Federation of Nepal Gold and Silver Dealers Association, 40 percent for the Nepal Gold and Silver Gems and Jewellery Federation, and 10 percent for the Federation of Handicraft Association of Nepal. The procedure stipulates that businessmen should sell the gold received from banks only by making jewelry.

According to the date of the Department of Customs, 2,350 kg of gold worth Rs 20.76 billion has been imported as of mid-May of the current fiscal year.