| Date: |
31-08-2015 |
| Subject: |
Give banks priority sector lending benefit to boost gold monetisation, says WGC |
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KOLKATA: The World Gold Council has said that the government should provide an incentive to banks to promote the proposed gold monetisation scheme aggressively since the finance ministry is unlikely to link the scheme to the cash reserve ratio.
"If the scheme is not linked to CRR, then the banks should be incentivised," said Somasundaram PR, managing director, World Gold Council India.
"Given the quantum of demand each year in India, a strong incentive would be to allow banks to import gold free of duty up to a certain quantum, determined by the amount of gold collected under the monetisation scheme."
Somasundaram said banks should be given priority sector lending benefit for the gold lent to jewellers against the gold collected under the scheme. "This will encourage banks to accept gold deposits on a large scale and step up the pace of growth of gold loans, which will in turn drive their profitability. The banks should also be allowed to hedge the gold collected under this scheme," he said.
India consumes 900-950 tonnes of gold annually. It is estimated that nearly 22,000 tonnes of gold is locked up in Indian households as idle assets.
The Narendra Modi government wants to unlock this gold through the monetisation scheme so that the country's dependence on imported gold gets reduced.The draft guidelines of the government on the scheme suggest that banks will be allowed to pay interest on gold accumulated 30 to 60 days after deposit. "We would recommend that the interest accumulation to the customers starts immediately on account opening," said Somasundaram. He said the cost of work in progress should be factored into the interest rate offered. Such a model will be easier to communicate to customers and encourage banks to reduce the time frame from customer deposit to use in monetisation through superior operations. "The interest rates could be on a par with FCNR (foreign currency non-resident deposits) that range froms 1.5% to 2.5%," the World Gold Council India chief said.
Somasundaram said incentives should be rolled out to enable the improvement or creation of quality refineries, melting plants and assaying centres in multiple locations in India. This will reduce the need for transportation to bank branches, refineries and the government mint. "It will improve cost efficiency. Eight to ten international accredited refineries and over 300 melting centres will be needed," he said.
Source : economictimes.indiatimes.com
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