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Bullion trade feels Koda hawala heat.

Harassed traders want simple rule for cash deals

BULLION traders have alleged harassment by government agencies and departments after the over Rs 4,000- crore hawala scam by Madhu Koda brought to light that the majority of their transactions take place in hard cash.

The traders said some banks were not accepting large amounts of cash deposits reversing their earlier practice, while tax officials were questioning the practice of keeping large amounts of cash in bank accounts, calling it ' unaccounted money'. The traders have demanded simplification of regulations for promotion of the bullion trade, including allowing depositing any amount without limit and without additional charges, and moving towards as single tax regime across the country.

" Koda might have utilised the bullion channel to deploy his funds to the tune of Rs 650 crore.

But punishing bullion traders for the same may not be appropriate.

One can always verify the credibility of the transaction," said Bhargava N. Vaidya, a chartered accountant and advisor to the Bombay Bullion Association ( BBA). The hawala scam involves transfer of funds internationally through illegal or improper channels.

Former Jharkhand chief minister Madhu Koda and his associates deposited Rs 650 crore in Union Bank of India for buying gold. And the transaction was executed through the bank. The bank termed the transaction that took place during 18 months ended December 2008 as ' normal and usual'. Under the leadership of BBA, traders are planning to make a presentation to the Reserve Bank of India ( RBI), explaining their plight and lack of alternatives, and requesting for permission to continue their transactions in hard cash.

A survey commissioned by bullion traders found that 95- 96 per cent of all bullion transactions were being done in cash. Mail Today, through its edition dated November 14, 2009, was the first to highlight that most of the high- value transactions in this market were being done in cash.

" Rationalisation of different methods and market practices in the bullion market over the last 11- 12 years has brought in a semblance of order in the market," Ramesh Pahlajani, a leading bullion trader.

" Huge amounts of deposits are not unique to bullion trade alone.

It is seen in organised retail firms, food product chains, cafeterias and restaurants. The same way it should be allowed in the case of bullion trading as well," said Suresh Jain, director of BBA. Though deposits are made in cash, most of the bullion purchases are done by the bullion traders through banking channels.

Otherwise, it would be very difficult to convince government officials about the source of jewellery.

However, retailers mostly receive cash on sale and they pay wholesalers in cash.

Accepting cheques against delivery of gold is a risky proposition, said Prithviraj Kothari, managing director of Riddhi Siddhi Bullions, due to the three days it takes to encash. Meanwhile, the market could fall and the customer could revoke the cheque. " It takes years to realise the money by pursuing the bounced cheque through courts," Kothari added.

Koda might have utilised the bullion channel to deploy his funds. But punishing traders for the same may not be appropriate. One can verify the credibility of the deal

-- B. N. Vaidya, Advisor, BBA

Huge deposits are not unique to bullion trade alone. It is seen in organised retail cos and food chains. The same way it should be allowed in the case of bullion trading

-- Suresh Jain, Director, BBA

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Publication:Mail Today (New Delhi, India)
Date:Dec 2, 2009
Words:583
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