Gold deposit plan may slow down imports

MUMBAI, SEPT 17: The government's decision to launch an ambitious gold deposit programme is likely to pull down imports of the yellow met...

MUMBAI, SEPT 17: The government8217;s decision to launch an ambitious gold deposit programme is likely to pull down imports of the yellow metal in the long run. Gold imports are set to fall by 50 per cent as a huge quantity of gold lying with temples and trusts is likely to come as deposits.

quot;The scheme will bring down our imports by more than half within six months after it becomes operational,quot; said a Mumbai dealer, adding, quot;this is because a huge quantity of gold that is lying with temples and trusts will come as deposits.quot; However, experts are not sure whether individuals will come forward in large numbers to deposit gold.

It is estimated that around 3,000 to 4,000 tonnes of gold are held by temples, religious institutions and trusts. India is the world8217;s largest gold consumer and meets almost all its requirements from imports. It officially imported 614 tonnes of gold worth 5.8 billion around Rs 25,230 crore in 1998, according to the World Gold Council WGC.

Indians are estimated to have a goldstockpile of about 10,000 tonnes, accumulated over generations and mainly comprising family heirlooms and jewellery that formed part of dowry gifts.

The government on Wednesday unveiled the Gold Deposit Scheme 1999, announced earlier this year to draw out privately held gold stocks and reduce India8217;s dependence on imports. Under the plan investors will deposit gold with banks and receive fixed term interest-bearing certificates or bonds in exchange. The depositors can take back their gold or the equivalent in rupees when the instrument matures. The banks can lend out the collected gold to jewellers and other merchants in the local market.

Bankers said the Reserve Bank of India RBI now needed to spell out guidelines on interest rates and other details. quot;All other formalities have been completed. Once the RBI spells out its guidelines, it should take a maximum of three months for banks to launch the scheme,quot; said an official of a public sector bank.

The central bank is likely to set a limit for interestrates on gold deposits. Five state-run banks have submitted detailed gold banking plans to the RBI and have set a target of gathering 100 tonnes of gold in the first year of the programme.

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Dealers were unsure about the public response because of the sentimental value attached to gold and economic reasons. They said jewellery converted into gold bars or coins would lose nearly 20 to 40 per cent of its value. They said jewellery normally consisted of about 80 per cent pure gold.

Banks would give a certificate only for the gold component and the individual would stand to lose on the rest, they said. quot;Large religious institutions may be interested because they will have lot of gold but I am doubtful about individuals,quot; said an analyst.

Traders said the interest on any gold deposited would be based on lease rates in the world market, currently around 3.50 per cent per year. quot;In that case, rate of interest to the public will be much less than the interest rate available for cash deposit or advances,quot; analystssaid.