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On 16 May 2026 the Directorate General of Foreign Trade (DGFT) announced that high‑purity silver bars (99.9% purity or higher) will be reclassified from “Free” to “Restricted” status. The change, coupled with a recent 9‑point duty hike, means that more than 90% of silver imports now require a government licence, a move aimed at curbing foreign‑exchange outflows and stabilising the rupee amid rising energy costs and geopolitical tensions.

Background

India is one of the world’s largest importers of precious metals, with approximately 80% of its silver demand met through imports. The rupee has weakened in recent months due to a combination of higher global oil prices and geopolitical uncertainty that has increased the country’s trade deficit. Historically, the Indian government has adjusted gold and silver import duties in response to current‑account pressures, tightening rules when the rupee falls and loosening them when the economy stabilises.

In early May 2026, the government raised import duties on gold and silver from 6% to 15% and added a 3% Integrated Goods and Services Tax (IGST) on bullion imports. The new licensing requirement, announced on 16 May, follows these tariff changes and targets the bulk of silver bar imports classified under ITC HS Codes 71069221 and 71069229.

What Happened

The DGFT’s decision reclassifies high‑purity silver bars as “Restricted,” requiring importers to obtain a government licence. The licensing requirement covers more than 90% of silver bar imports. Exemptions exist for 100% Export Oriented Units (EOUs), Special Economic Zones (SEZs), and imports linked to export promotion schemes, allowing silver used for export‑oriented production to continue flowing without licence constraints.

Earlier in the week, on 12 May 2026, the government increased import duties on gold and silver from 6% to 15% and imposed an additional 3% IGST on bullion imports. The combined effect of the duty hike and the new licensing rule has significantly increased the effective cost of importing silver into India within a single week.

The policy shift is also aimed at closing a pricing gap created by the India‑UAE Comprehensive Economic Partnership Agreement (CEPA). Traders had been exploiting preferential rates through the UAE corridor, effectively undercutting the standard duty structure. By tightening import rules and raising duties, Delhi is closing that loophole.

Market & Industry Implications

The immediate impact is a higher cost for domestic silver importers, potentially leading to higher prices for finished goods that rely on silver. The licensing requirement is likely to slow the flow of silver into the country, reducing foreign‑exchange outflows and helping to support the rupee. Exemptions for EOUs and SEZs mean that export‑oriented production will be less affected, preserving India’s competitive position in global markets.

Silver producers and traders may face increased compliance costs and longer lead times due to the licence application process. The policy could also reduce arbitrage opportunities that previously existed under the CEPA, limiting the ability of traders to import silver at preferential rates through the UAE corridor.

Given that India imports the majority of its silver, the policy is expected to tighten the supply chain and could influence the domestic silver price curve. However, the extent of price movements will depend on how quickly importers adjust their sourcing strategies and whether they shift to alternative suppliers or increase domestic production.

What to Watch

  • Upcoming DGFT licence application procedures and timelines for silver importers.
  • Any further adjustments to import duties or IGST rates on precious metals.
  • Market reactions in the silver price index and rupee exchange rates in the weeks following the policy change.
  • Statements from industry bodies such as the All India Silver Manufacturers Association regarding the impact on production and export plans.