Gold Monetisation Yields 3 Tonnes, Government May Tweak It Further

New Delhi: Government may further tweak the gold monetisation scheme to make it more attractive after low returns and tax worries kept households and temples with about 20,000 tonnes of gold worth over dollar 800 billion away.

Following realisation of just 3 tonnes of gold, Economic Affairs Secretary Shaktikanta Das met with Indian Bullion Association and jewellery representatives to discuss ways to make the programme work better.

Tweaking the plan is on the table as it was proposed that changes should be applied retrospectively from the date the scheme started, sources said.

"In the long term, the gold monetisation scheme should succeed. We reviewed the difficulties in the gold monetisation scheme and took suggestion and now they are under consideration," Das said today after the meeting.

Admitting that gold received under the scheme was "lower than expected amount", he said temple trusts have "started showing interest in the gold scheme".

Prime Minister Narendra Modi on November 5 last year had launched the programme to lure tonnes of gold lying idle with households and temples into the banking system. But low returns and concerns over tax authorities hounding depositors have hampered the scheme, which is aimed at cutting imports.

The scheme was fine-tuned in January allowing premature redemption, commission for bankers and depositors being allowed to go directly to the refiner rather than only through collection and purity testing centres.

With an estimated 20,000 tonnes of gold stashed in homes and temples -- that is, more than double the holdings in the US -- the government came out with the monetisation plan that allows holders to deposit their jewellery or bars with banks and earn interest.

A low interest rate of up to 2.5 per cent and the penchant of Indians for holding physical gold have drawn lesser people to the scheme, which is part of broader plans to tighten gold imports after the current account deficit swelled to a record in 2013 and the rupee slumped to an all-time low.

While the deposits can be for 1-15 years, the banks are free to sell the gold to jewellers, potentially boosting supply.

Together with the monetisation plan, the government had also announced sale of gold-backed bonds to shift part of the estimated 1,000 tonnes a year demand for the bullion.

Bonds are issued in denominations of 5 grams, 10 grams, 50 grams and 100 grams for a term of 5-7 years with a rate of interest to be calculated on the value of the metal at the time of investment.

Under the monetisation scheme, the investor gets his gold back in form of a bar or coin, with the risk of gold price changes being borne by a gold-reserve fund to be set up by the government.

Gold, at 1,000 tonnes a year, is the second-biggest imported commodity in India after crude oil.

During April-January, gold imports increased to dollar 29.36 billion as against dollar 27.42 billion in the first 10 months of 2014-15.

 

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