MUMBAI: India is the largest consumer of Gold in the world. In India, gold enjoys a safe haven status even today. As per ancient Hindu tradition, Indians have always believed it to be a sign of prosperity, especially worn at weddings or auspicious occasions. Tradition has it that gold brings good luck and prosperity to the family where it finds a safe abode. It is this very reason that Indians buy and accumulates gold in their houses. There is an estimated 20,000 tons of gold stock lying idle in the country deriving no interest or benefit for the holder.
It is for this very purpose that recently, the government unveiled draft rules for a program - India's Gold Monetization Plan, that aims to monetize India's gold, which will earn some sort of interest for the holder and be put to more productive use.
If the government is able to put these stocks to use, it could help slash imports which currently stand at nearly 1000 tons annually. This would help to cut down imports of Asia's largest economy and meet demand through local supplies.
Finance Minister Arun Jaitley had announced the gold monetization plan in the federal budget presented in February, this year. It showed how gold depositors would be able to earn tax-free interest, while jewelers could seek loans from banks against the gold they hold. Banks would also stand to benefit from the program. They would be allowed to deposit gold with the Reserve Bank of India to meet their cash reserve requirements.
"This is a very good initiative taken by the government in putting to use an important asset held by most Indians. If implemented in the right spirit, the country can save crores of rupees in gold imports and this will also help kick start the banking system in the country," said Mr. Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions Limited (RSBL).
"The proposal looks good on paper in its current form, but needs to address some concerns of banks and consumers," added Mr. Prithviraj Kothari. The returns on gold deposits are currently very low, yielding just 1 per cent interest. There is a need to improve returns and make it more attractive for customers to come forward and invest their gold into the banking system.
For the smooth implementation of this plan asking depositors to show proof of gold ownership is a big task for most Indians; as the gold is often passed on from generation to generation. Mr. Kothari feels that these points if addressed and incorporated, then the final plan would achieve its objective.
For more information, vsist: http://rsbl.co.in/
Edriech De Souza
Concept Public Relations India Limited