Efforts are being made to revive the Gold Monetisation Scheme in a bid to mobilise idle gold lying with Indian households.
Around 25,000 tons, valuing almost half of India’s GDP, of idle gold is lying with Indian households, according to the World Gold Council estimates.
The suggestions being discussed by the panel formed by the Niti Ayog include involving jewellers in the scheme as a collection centers, solving issues that banks are facing and using only domestically available gold for giving gold metal loans to jewellers for domestic sales.
It's almost two years when the most ambitious gold monetisation scheme was launched by the prime minister on November 5, 2015 and so far not even 10 tons have been mobilised under the scheme.
If that is not enough to talk about its lacklustre performance, whatever gold has been mobilised is from temples with few retail consumers coming up for the scheme.
And in many cases, temples renewed gold deposits maturing under gold deposit scheme launched in 2000. Hence real success to the scheme is still evasive.
According to information from the Association of Gold Refineries and Mint, around 10 refineries and 50 gold collection centeres (hallmarking centers) are licensed to accept gold under the scheme and consumers keep making inquiries.
“We are not ready to accept gold as deposits as operating banks are not ready at their end to accept gold deposits due to variety of reasons,” said James Jose, Association’s secretary.
However, banks, according to an industry official, are not finding it viable to accept gold deposits from small investors for less than 500 grams. Even for bulk deposits, interest for medium and long term deposits is to be reimbursed by the government to respective banks but that has not happened. Government has not prepared even operative guidelines on this.
Banking industry feels government shall clarify its stand on the scheme that how it wants to progress.
Sanjeev Agrawal, Chairman of FICCI Gems & Jewellery Committee said that, “Jewellers can be involved in GMS as customers enjoy confidence in dealing with their regular jewellers and they may be ready to part with their jewellery to put as deposit under GMS. Jewellers that are certified and licensed by the Bureau of Indian Standards shall be allowed to act as a agents of banks to collect gold deposits under GMS and their acknowledgement shall be used by banks for opening and crediting depositors account with that much gold.” So far BIS has prescribed costlier machinery for this.
"We propose that jewellers shall be allowed to accept such deposits and that gold can be lent to jewellers back under gold metal loans as pre-approved rates and eligibility criteria as fixed by respective banks. This will make the scheme practical for banks to handle as handling smaller quantity of gold is routine for jewellers, may not be viable for banks,” said Agrawal.
Banks, however, are reluctant to support this. There is also an alternate to allow jewellers to accept gold as deposits and pay interest to depositors and use that gold for jewellery and return to depositors as per pre-determined terms, like the way they accept cash deposits from them. Agrawal said annually around 140 tons of gold jewellery is sold to jewellers for buying new jewellery or encash it.
James Jose of refiners’ association said, “GMS deposit interest rate is over 2 per cent which is costlier if the same gold is to be lent back to jewellers as from international sources such loans are available at 1.5 per cent rate. To tackle this issue, metal loans from overseas shall be permissible to only exporters which may motivate banks to push GMS.”