Govt allows gold hedging

The Consumer Affairs Ministry is the nodal ministry for foward trading in the country with the Forward Markets Commission, the regulatory body of commodities market in the country, functioning under it.

The gold deposit scheme was one of the features of the 1999-2000 budget presented by Finance Minister Yashwant Sinha in February last. The Consumer Affairs Ministry8217;s notification follows clearance from the Law Ministry earlier this week.

It was necessary for banks, which were keen to launch the scheme, to do forward trading in the yellow metal to cover their risks. Some of the banks have proposed to RBI that they be allowed to make payments in rupees in case the depositors withdrew from the scheme before the completion of the tenure.

The RBI was required to put in place a number of guidelines including permission for banks to hedge in bullion to cover the risks of gold accepted in deposits as the absence of such a measure would lead to greater risk exposure,

Currently only corporates and the canalising agencies are allowed to hedge in commodities for a maximum period of six months. Banking sources say the process of putting in place the guidelines and required logistics would take at least six months before the banks could actually start mobilising gold.

The five banks which plan to launch the scheme have approached the World Gold Council and the Bureau of Indian Standards BIS to put in place as saying centres across all major towns in the country.

Already WGC and BIS have joined hands together to set UPF interest on the gold deposit bonds from income tax and the value of assets deposited in the scheme from wealth tax. Also any capital gains made on these bonds through trading or at redemption would be eligible for exemption from capital gains tax.