With the RBI opposing gold deposit as bank Cash Reserve Ratio (CRR), the government has dropped plans to use gold mobilised under the proposed monetisation scheme for meeting mandatory liquidity requirements for banks.
“The government does not want to open many fronts with the RBI,” official sources said.
The RBI had recently written to the Finance Ministry that allowing gold as CRR will expose the central bank’s reserve to commodity risk. It also said that allowing banks to use gold as a part of CRR would mean excess hoarding of gold by the banks, which the central bank feels is not desirable in the financial system.
CRR is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the RBI. CRR is set according to the guidelines of the central bank of a country.
The gold monetisation scheme is due to be launched early next month.
Published 10 August 2015, 18:10 IST