In a bid to unlock the value of tonnes of gold lying idle in millions of homes, the Narendra Modi government on Saturday announced the introduction of gold deposit accounts under the Gold Monetisation Scheme.
Finance Minister Arun Jaitley, presenting Budget 2015, also announced plans to create an Indian gold coin carrying the Ashok Chakra emblem to cut the dependence on coins minted abroad and recycle the gold available in the country.
India imports 800-1,000 tonnes of gold each year, despite stocks to the tune of 20,000 tonnes that are neither traded nor monetised.
The Gold Monetisation Scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account, Finance Minister Arun Jaitley said while presenting the Budget for 2015-16 in the Lok Sabha on Saturday.
The monetisation scheme will replace the present gold deposit and gold metal loan schemes, Jaitley said, without specifying any timeline for its rollout.
“India has 21,000 tonnes of gold held by households and temples, which is lying dormant. To monetise that amount of gold would lead to more economic activity in the country as well as help people earn interest. It will also help create and develop the gold market in India,” RBI Chair Professor of Economics, IIMB, Charan Singh told Deccan Herald.
China and Turkey would be good examples to follow. The common man will be able to convert a dormant asset into a more liquid asset and make use of the money for more productive purposes.
The details of the scheme have not been released but in general banks should be actively involved in mobilising gold, assaying it and recycling it in the economy. Thus, banks will have more funds available to them which should create higher business besides higher incomes from this additional activity.”
Productive asset
Muthoot Finance Managing George Alexander Muthoot told Deccan Herald, “Gold deposited by the common man in the bank will be safe and he will be paid an interest (2.5 per cent) on the value of that gold. There are 20,000 tonnes of gold with the general public. Through this process, the idle asset at home will become productive, energising the economy. Gold monetisation will bring in the household used gold into the market. Thus reducing the need for import, and saving on valuable foreign exchange.”
However, the Finance Minister said the scheme would be extended only to raw gold. “In this manner, an unproductive asset can be made productive,” he said. Jaitley also announced sovereign gold bonds as an alternative to purchasing metal gold. “The bonds will carry a fixed rate of interest and also be redeemable in cash in terms of face value of the gold at the time of redemption by the holder of the bond,” he said.
