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Need to fine-tune Gold Monetisation Scheme: RBI governor Rajan

The scheme, which was launched by Prime Minister Narendra Modi earlier this month, garnered only 400 grams of physical gold of the over 20,000 tonnes worth gold lying idle in the country.

By: ENS Economic Bureau | New Delhi | Updated: November 28, 2015 1:35:22 am
rajan759 Raghuram Rajan

Amid lukewarm response to the Gold Monetisation Scheme, the Reserve Bank of India on Friday said that it is working on fine-tuning the scheme to make it attractive. “We need some fine tuning (Gold Monetisation Scheme),” Raghuram Rajan, governor, RBI, told reporters here. The scheme, which was launched by Prime Minister Narendra Modi earlier this month, garnered only 400 grams of physical gold of the over 20,000 tonnes worth gold lying idle in the country.

According to the government estimates, the country has over 20,000 tonnes worth over Rs 52 lakh crore of idle gold with households and institutions. Concerned over the underwhelming response, the gems and jewellery industry representatives had met economic affairs secretary Shaktikanta Das last week to discuss ways of making the scheme lucrative.

The industry had urged the government to allow Bureau of Indian Standards-certified jewellers to act as collection agent for Gold Monetisation Scheme, and the finance ministry has already given in-principle approval to the suggestion. Currently, there are 3.5 lakh jewellers in the country, of which 13,000 are BIS-certified. BIS is expected to complete the registration of 55 numbers of collection and purity testing centres by the end of December 2015.

The government has also decided to allow gold depositors to give their gold directly to the refiner without involving the collection and purity testing centres, in a bid to encourage bulk depositors like HUFs and institutions to participate in the scheme.

Ahead of Diwali, on November 5, the Prime Minister had launched three gold-related schemes — Sovereign Gold Bond Scheme (SGB), Gold Monetisation Scheme (GMS) and Indian Gold Coins and Bullions — in a bid to reduce the physical demand for gold. Modi had said India has surpassed China as the world’s largest gold consumer, buying 562 tonnes of yellow metal so far this year, against China’s 548 tonnes. India currently imports around 1,000 tonnes
of gold every year, leading to outflow of forex reserves.

While the monetisation scheme has not got much response, the government claimed that as many as 63,000 application totalling Rs 246 crore has been received under the first tranche of Sovereign Gold Bond Scheme, which closed on November 20. The allotment of bonds will happen on November 30.

The main objectives of the scheme is to reduce the demand for physical gold and shift a part of the gold imported every year for investment purposes into financial savings through gold Bonds.

Rajan said that the response to the Sovereign Gold Bond, “has been good and encouraging”. Shaktikanta Das tweeted that “this is an excellent response for an innovative product”. The first tranche of the bonds was issued by RBI at the branches of scheduled commercial banks and designated post offices through its e-kuber system and more tranches will be issued during the financial year.

“It may be noted that this overwhelming response has been received from the retail investors who are the focus of this scheme. The positive response to this new and innovative saving instrument has elicited response from across the country and it is expected that subsequent tranches will continue to receive such enthusiastic response,” an official statement said. The statement said that based on the feedback received from stakeholders, the government will continuously monitor and review the progress of the schemes at the regular intervals and make necessary improvements to increase the reach of the schemes.

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