Nepal Rastra Bank (NRB) plans to implement a temporary provision on gold sales outside Bagmati zone.

It will bar bullion dealers from buying gold with the recommendation of more than one traders' association. The central bank requires traders to obtain a recommendation from their association to buy gold from banks. On Tuesday, NRB fixed the maximum quantity of gold to be sold to traders affiliated to four associations in response to complaints of haphazard distribution. However, there will be no change in the distribution system in Bagmati zone.

"We have completed all the preparations, and we will soon implement the new provision at the district level for a short period," said the official. He added that it would help reduce the shortage of gold being felt at the district level and stop the practice of exceeding the purchase quota by producing recommendations from several associations.

This new provision for the district market will be implemented for a one-month period, according to the NRB official. Of the 6 kg of the gold being released in the districts daily, the Nepal Gold and Silver Dealers Association (Negosida) will get 65 percent, Nepal Gems and Jewellery Association (Negja) 25 percent, Nepal Gold and Silver Artist Association (Negosaa) 7.5 percent and the Federation of Handicraft Associations of Nepal (FHAN) 2.5 percent for their member traders.

In Bagmati zone, of the total 9 kg of the yellow metal released daily, Negosida has been getting 50 percent, Negja 30 percent and FHAN and the Nepal Gold and Silver Artisan Association 10 percent each. The central bank had also directed the four associations issuing recommendations to submit a list of their members within a month in a bid to devise a better nationwide distribution system.

The new provision will hold commercial banks strictly responsible for following the NRB directive and they will not be allowed to sell gold from Kathmandu to traders from out of Bagmati zone. Authorised banks will have to sell 40 percent (6 kg) of their daily quota (15 kg) from their branches at Birtamod, Biratnagar, Janakpur, Birgunj, Bhairahawa, Nepalgunj, Dhangadhi and Pokhara.

"The gold distribution system at the district-level market was chaotic, and the yellow metal was not reaching the actual bullion traders," said Tej Ratna Shakya, president of Negosida. He added that even though the main problem was limited quota for the local market, the new provision would help make distribution transparent.

As per the central bank's provision, bullion dealers buy gold from commercial banks as per the recommendation issued by their associations. However, traders had been found to have become members of many associations and getting recommendations from them to buy more gold creating a shortage in the market.