The government has finally come out with a draft for a gold monetisation scheme whereby banks will pay interest on the gold deposited with them. While the details of the scheme are still a work in progress, the buzz is that banks will pay interest of one per cent and that the government could exempt this interest from various taxes, including income-tax.
One per cent is the leasing rate of gold globally and it hardly sounds attractive. Perhaps this will have to be increased considering the various uses that banks will be permitted to make of the gold deposits. If this monetisation scheme is to incentivise people to come out with their gold, the interest rate would have to be more liberal.
It is also felt that government should make it easy to get the people to value their gold before depositing it as there are barely about 32 refineries. One hopes these various aspects are looked into and that there is a monitoring body to see the scheme works efficiently.
Gold monetisation has been a long-standing demand of the chambers of commerce, the jewellery industry and others as a way out of cutting down on imports to meet the growing demand for gold. They feel such a scheme would bring out at least one per cent, if not 10 per cent, of the almost 20,000 tonnes of gold reportedly lying with households. The country imports between 800 and 1,000 tonnes of gold with India being one of the largest importers, after China.
