Govt floats tax-free scheme to monetise Rs 60-tr idle gold
Seeking to monetise idle gold worth up to Rs 60 lakh crore held by households and institutions, <g data-gr-id="45">government</g> on Tuesday proposed a new scheme offering tax-free interest on depositing the yellow metal with banks. The draft gold <g data-gr-id="42">monetisation</g> scheme also provides for incentives to the banks, while individuals and institutions can deposit as low as 30 gms of <g data-gr-id="44">gold,</g> while the interest earned on it would be exempt from income tax as well as capital gains tax.
The stock of gold in India that is held by people of the country that is ‘neither traded nor monetised’ is estimated to be over 20,000 tonnes, which would be worth about Rs 60 lakh crore at the current market price. A large amount of gold is also held by temples and other religious institutions.
However, the draft scheme does not specifically mention the kind of institutions that would be covered under it.
India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. As per the draft guidelines, a person or institution holding surplus gold can get it valued from BIS-approved <g data-gr-id="54">hallmarking</g> centres, open a Gold Savings Account in banks for a minimum period of one year and earn interest in either cash or gold units. The Finance Ministry has sought comments from stakeholders on the draft gold <g data-gr-id="55">monetisation</g> scheme by June 2. The scheme, which is proposed to be initially introduced only in select cities, was announced in the Budget this year by Finance Minister Arun Jaitley. “The new scheme will allow the depositors of gold to earn <g data-gr-id="52">interest</g> in their metal accounts and the jewellers to obtain loans in their metal account. Banks/other dealers would also be able to <g data-gr-id="56">monetise</g> this gold,” Jaitley had said. .
Under the proposed scheme, the bank interest to the customers will be payable after 30/60 days of opening of the Gold Savings Account. “The amount of interest rate to be given is proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors of <g data-gr-id="48">gold,</g> will be ‘valued’ in gold,” the draft norms said. It added, as <g data-gr-id="46">example</g>, that if a customer deposits 100 gms of gold and gets 1 <g data-gr-id="38">per cent</g> interest, then, on maturity he has a credit of 101 gms.
With regard to redemption, the guidelines said that customers will have the option of getting it back either in cash or in gold, which will have to be <g data-gr-id="63">exercised in</g> the beginning itself that is, at the time of making the deposit. The tenure of the scheme has been proposed at a minimum 1 year and with a roll out option in multiples of one year, it said, adding that it would be like a fixed deposit, breaking of lock-in period will be allowed. “To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” it said. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are <g data-gr-id="60">mandatory</g> <g data-gr-id="58">requirement</g> which banks have to follow as per RBI directive. Elaborating other benefits of the scheme, the guidelines said, banks may sell the gold to generate foreign currency.
The foreign currency thus generated can then be used for onward lending to exporters or importers. Bank may convert mobilised gold into coins for onward sale to their customers and can be used for lending to jewellers, it said. The government is also planning to commence work on developing an Indian Gold Coin, which will carry the Ashok Chakra on its face.
Banks may get nod to use gold deposits for meeting CRR, SLR
The government is considering allowing banks to utilise gold mobilised under the <g data-gr-id="101">monetisation</g> scheme for meeting mandatory liquidity requirements set by the Reserve Bank. “To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” a draft guidelines on Gold Monetisation Scheme said.
The Cash Reserve Ratio is the portion of the total deposits, which has to be kept with RBI in <g data-gr-id="103">cash,</g> while Statutory Liquidity Ratio (SLR) is the portion of deposit compulsorily parked in government securities. CRR is 4 per cent while SLR is 21.5 per cent. So, 25.5 <g data-gr-id="102">per cent</g> of the cash deposit mobilised by banks are locked in these two statutory ratios.