Govt to rope in banks for gold monetisation

Collects 500 kg of gold in first tranche

Unable to tap household gold for the ambitious gold monetisation scheme, the government has now decided to rope in banks actively into the initiative.

It has agreed to pay the lenders 2.5 per cent commission as an incentive to lure more people into the scheme.

India has an estimated 20,000 tonnes of gold lying idle with households and temples. The Prime Minister Narendra Modi government wants to turn this into productive investment and infrastructure building.

But the government has so far not met with much success. It has been able to collect about 500 kg of gold through the first tranche of gold schemes launched in November. last year.

“The government has decided to pay the participating banks a total commission of 2.5 per cent, including 1.5 per cent handling charges for the first year,” the Reserve Bank of India has said in a statement.

The banks have been asking for a higher rate of compensation from the government to be able to give depositors of gold an attractive rate.

Under the revised rules by the RBI, banks are allowed to accept gold under medium- and long-term deposit schemes. For the medium-term deposit of 5-7 years, the customers can earn 2.25 per cent interest annually. The interest for long term deposits is 2.5 per cent.

In November last year,  Modi had launched a scheme to channelise gold worth over Rs 52 lakh crore lying with households into the banking system and floated paper bonds to curb its imports that have made India the largest buyer of gold in the world.

India imports about 1,000 tonnes of gold every year. This is huge drain on forex reserve, after oil.

Cashing in on gold

 The government has agreed to pay the lenders 2.5% commission as an incentive to lure more people into the scheme

 India has an estimated 20,000 tonnes of gold lying idle

India imports about 1,000 tonnes of gold every year, which is a huge drain on the forex reserves