MPs praise gold scheme, but don’t opt for it

In November 2015, Prime Minister Narendra Modi launched the gold monetisation scheme to tap part of an estimated 20,000 tonnes of idle gold worth Rs 5,40,000 crore lying in family lockers and temples into the banking system and reduce India’s reliance on gold imports in the long run. India’s current account deficit — the excess of imports over exports — shot up to as high as 4.9 per cent of GDP in June 2013 as Indians imported about 400 tonnes of gold. This forced the government to clamp down on gold imports by raising duty to 10 per cent and imposing other restrictions such as requiring traders to export 20 per cent of the precious metal they bought overseas.Gold prices have climbed by 26 per cent in the last 12 months.

Gold prices have climbed by 26 per cent in the last 12 months.

The government has so far been able to mobilise only 2,891 kgs of gold from about 105 depositors under the gold scheme according to finance ministry data released on May 16. Almost half of these have come from the richest temple of the country, the Tirupati Balaji temple in Tirupati in Andhra Pradesh.In April, the Tirumala Tirupati Devasthanams (TTD), which manages the Balaji temple, deposited 1,311 kg of gold under the three-year short term gold monetisation scheme at an interest rate at 1.75 per cent per annum. Apart from the TTD, the response to the scheme has been lukewarm.

In April, the Tirumala Tirupati Devasthanams (TTD), which manages the Balaji temple, deposited 1,311 kg of gold under the three-year short term gold monetisation scheme at an interest rate at 1.75 per cent per annum. Apart from the TTD, the response to the scheme has been lukewarm.

“It’s early days to comment on a scheme which has hardly started. But it does not seem likely to succeed because there appears to be no reason and no incentive for people to start purchasing these receipt bonds in this regard by disclosing their gold holdings,” Abhishek Manu Singhvi told The Indian Express. “I have not opted for the scheme because it’s too early for the scheme. I have just heard about it,” he said.

Singhvi and his wife together hold at least 24 kgs of gold jewellery, according to his pre-election affidavit.

The government’s gold monetisation scheme allows individuals to park a minimum of 30 grams of the yellow metal with banks and earn tax-free interests of up to 2.5 per cent. Modi had urged Indian women to opt for the scheme, but parliamentarians such as Amar Singh of Samajwadi Party feel that his wife, who holds at least 13 kgs of gold in the form of jewellery and heirlooms, will never allow him to opt for the scheme.“I would love to put my gold in the scheme but I have not been able to convince my wife to part with her gold holdings. I know she will not do it and, if I opt for the scheme, it will lead to domestic squabble which I don’t want,” said Singh.

“I would love to put my gold in the scheme but I have not been able to convince my wife to part with her gold holdings. I know she will not do it and, if I opt for the scheme, it will lead to domestic squabble which I don’t want,” said Singh.Singh also said typically, middle-class families view gold and real estate as a long-term investment. “The gold monetisation scheme is pragmatic but it will be a herculean task for the government to unlock the gold held in Indian households,” he said.

Singh also said typically, middle-class families view gold and real estate as a long-term investment. “The gold monetisation scheme is pragmatic but it will be a herculean task for the government to unlock the gold held in Indian households,” he said.

BJP MP Hema Malini, who holds at least 5.4 kgs of gold, said she has not thought about opting for the gold monetisation scheme. “I have not thought of anything like that as of now. I will have to check up on the scheme before I comment on it,” she said.Even if the new scheme is able to mop up 200 tonnes of deposits every year, it could help reduce India’s gold import bill by Rs 60,000 crore or over $9 billion in a year. But experts feel that the scheme may not be able to attract depositors as it falls short in the perception of Indians.

Even if the new scheme is able to mop up 200 tonnes of deposits every year, it could help reduce India’s gold import bill by Rs 60,000 crore or over $9 billion in a year. But experts feel that the scheme may not be able to attract depositors as it falls short in the perception of Indians.“The gold monetisation scheme has not taken off well as most Indians hold gold in the form of jewellery and heirlooms which they don’t want to part with. Moreover, the scheme promises to give back an equal amount of gold, and not the jewellery, to the depositor at the end of the term. But this scheme can really work for unlocking over 2,000 tonnes of gold lying in temples across the country,” said Manoj Nagpal , the chief executive officer of Outlook Asia Capital, a consulting and wealth management firm.

“The gold monetisation scheme has not taken off well as most Indians hold gold in the form of jewellery and heirlooms which they don’t want to part with. Moreover, the scheme promises to give back an equal amount of gold, and not the jewellery, to the depositor at the end of the term. But this scheme can really work for unlocking over 2,000 tonnes of gold lying in temples across the country,” said Manoj Nagpal , the chief executive officer of Outlook Asia Capital, a consulting and wealth management firm.

BJP MP Poonam Mahajan said the government is trying to end the parallel economy of cash and gold but the scheme has not picked up as gold is emotionally and culturally connected to Indians.

When asked if she has opted for it, Mahajan, who holds at least 2.8 kgs of gold jewellery, said, “I don’t wear gold and don’t have much gold. Most of the gold is owned by my family and they have purchased it in white. I have not opted for the scheme but now that you point out, I feel that my family should actually opt for it. I am in Delhi right now but I will go back and see if it has been done.”According to Mahajan’s pre-election affidavit, she and her husband alone hold at least 5.6 kgs of gold jewellery.

According to Mahajan’s pre-election affidavit, she and her husband alone hold at least 5.6 kgs of gold jewellery.“While the intention of the Modi government is good, I am sceptical about the success of the scheme. Indian households look at the yellow metal as an emotional asset and not as a liquid asset. I have not offered the gold I hold for the gold monetisation scheme. The implementation of the scheme is too cumbersome and logistically very difficult,” said Rabindra Kumar Jena of BJD, who together with his wife holds at least 9.2 kgs of gold.

“While the intention of the Modi government is good, I am sceptical about the success of the scheme. Indian households look at the yellow metal as an emotional asset and not as a liquid asset. I have not offered the gold I hold for the gold monetisation scheme. The implementation of the scheme is too cumbersome and logistically very difficult,” said Rabindra Kumar Jena of BJD, who together with his wife holds at least 9.2 kgs of gold.

BJP MP from Karnataka Shivakumar Udasi, who holds at least 4.5 kgs of gold along with his wife, said that he is in talks with his auditor to see if he can opt for the government scheme.