Despite disappointing a vast majority of Indians by not pruning the 10% import duty on gold while unveiling the budget for the next fiscal year starting April 1, the finance minister. introduced gold deposit accounts to utilise the 20,000 tonnes of gold — most of which is neither traded, nor monetized — and launched a gold monetization scheme, apart from several other monetization efforts.
In a move that is likely to cut gold imports, finance minister Arun Jaitley said the scheme will replace the present gold deposit and gold metal loan schemes where gold depositors will earn an interest on their metal account, while jewellers can obtain loans in it. Banks and other dealers will be able to monetise this gold.
He also proposed to develop an alternate financial asset, a Sovereign Gold Bond, as an alternative to purchasing metal gold. “The bonds will carry a fixed rate of interest, and also be redeemable in cash in terms of the face value of the gold, at the time of redemption by the holder of the bond,” he said.
The government will also commence work on developing an Indian gold coin, which will carry the ‘Ashok Chakra’ on its face. “Such an Indian gold coin would help reduce the demand for coins minted outside India and also help to recycle the gold available in the country.”
India ships in 800-1,000 tonnes of gold per year, despite massive stocks in the country. “The introduction of monetization scheme is a welcome step for economy as it will unlock tons of non-productive gold which will ultimatFM Arun Jaitley launches gold deposit accountsely reduce the import of gold and help easing current account deficit,” said Naveen Mathur, associate director-commodities and currencies, Angel Broking.
“All three gold-related announcements made by the finance minister are towards bringing out the locker gold into the formal system, facilitating transparency in the recycling sector and also reducing dependency on imports,” said Thomas John Muthoot, chairman and managing director, Muthoot Fincorp.