The Reserve Bank of India (RBI) today lifted the ban on imports of gold coins and medallions by banks and trading houses. 

The government and the Reserve Bank of India have given banks a free hand to import gold on "consignment basis". Domestic sales will be, however, permitted against upfront payment only. 

Under this system, banks source or borrow gold from international bullion banks and lend the yellow metal to domestic jewellers. The borrowing and the lending rates are fixed simultaneously. 

"While the import of gold coins and medallions will no longer be prohibited, pending further review, the restrictions on banks in selling gold coins and medallions are not being removed," it said.

Aiming to tame the then widening current account deficit (CAD), the central bank in August 2013 had prohibited imports of gold coins and medallions besides restricting inbound shipments of the metal. 

Under the 80:20 scheme, which was withdrawn on November 28 last year, gold imports were linked with its exports. 

Gold imports surged by 8.13 per cent year-on-year to $1.55 billion in January on easing of restrictions by the RBI. 

India is the largest importer of gold, which is mainly utilised to meet the demand of jewellery industry.