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* China curbing gold imports in bid to limit yuan outflow -traders
* China gold premium at $28-$30/oz this week
* India discount up to $5
By Sethuraman N R and Rajendra Jadhav
BENGALURU/MUMBAI, Dec 9 (Reuters) - Gold premiums in China held near three-year highs this week amid fears of limited supply of the precious metal, while demand in India remained subdued despite lower prices due to a severe cash crunch.
The import curbs may be part of China's efforts to limit outflows of the yuan after the currency's slide to its weakest in more than eight years, traders said. China allows only 13 banks to import gold, including three foreign lenders, according to the Shanghai Gold Exchange.
"The news on import restrictions is keeping the premiums high and there has been no real demand," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Gold was sold in China at about $28-$30 an ounce above the international spot benchmark this week, traders said.
Premiums went above $30 in November, the most since January 2014, according to Thomson Reuters data.
Spot gold is on track for its fifth consecutive week of declines on rising expectations of a rate hike by the U.S. Federal Reserve.
Gold demand in India remained subdued despite a drop in prices as retail demand was squeezed by cash crunch, while jewellers were delaying purchases expecting a fall in prices next week.
Dealers in the world's No.2 consumer of the metal were offering a discount of up to $5 an ounce this week over official domestic prices that include a 10 percent import tax, compared with a discount of up to $4 last week.
Indian gold prices fell to 27,700 rupees per 10 grams on Friday, the lowest level since Feb. 8.
"Everyone is running business with limited inventory. Jewellers are waiting for correction in prices and want to see how demonetization pans out," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in south Indian city of Chennai.
Last month, Prime Minister Narendra Modi scrapped 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, in part of a crackdown on corruption, tax evasion and militant financing.
Indian jewellers rely on the wedding season for an uptick in demand during winter months after the end of key festivals such as Diwali, but this year wedding demand has fallen sharply due to cash crunch, jewellers said.
India's overseas purchases of gold could halve to 50 tonnes in December after jumping to the highest level in 11 months in November.
In Hong Kong and Singapore sellers offered premiums of between $1-$1.50 an ounce. Discounts in Tokyo remained at 50 cents this week. (Reporting By Nallur Sethuraman in Bengaluru; Editing by Gopakumar Warrier)