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Policy to unlock gold reserves likely

Statesman News Service |

Once the gold is placed with the banks, they would issue appropriate certificates to the depositors concerned. The deposits would carry an interest of about 3.5 per cent
statesman news service
BANGALORE, 21 JUNE: The Union government is examining a proposal under which it may allow the general public to utilise its unused or idle gold and jewellery effectively while earning interest on it.
The move follows the urgent need to check soaring imports and to balance the current account deficit and is aimed at unlocking at least over 1,000 tons of the estimated hidden reserves of over 25,000 tons held by the Indian public in general.
The proposal to this effect was submitted by the All India Gems and Jewellery Trade Federation at a meeting with the officials of the Union ministries of finance and commerce yesterday. The federation with over six lakh members across the country has been crying foul over the recent government decision to curb gold imports which it claims is hurting the industry besides being counterproductive.
Termed as the Swarna Bachao plan or the Jewellery Deposit Scheme, it envisages a long-term window of three years at least. Under the scheme, the government could consider allowing specified licenced jewellers to attract gold from the public and deposit the same with scheduled banks.
The industry feels that this is a better option than to set up a bullion corporation or to even allow the banks to collect gold directly. The argument being that the jewellers, in comparison to the banks, have the required expertise to test, estimate, melt, purify, certify and guarantee the metal concerned.
Once the gold is placed with the banks, they would issue appropriate certificates to the depositors concerned. The deposits would carry an interest of about 3.5 per cent. As per the proposal, gold would be returned by weight after the specified period though premature withdrawals could also be considered after 18 months.
The suggested scheme also provides for an extension in multiples of six months with the renewals, if any, carrying an additional interest of one per cent.
According to Mr Vinod Hayagriv, past chairman of the federation and former director, World Diamond Council, by the end of 2013 India could be a $2 trillion economy with the gold stock alone representing almost 50 per cent of it. The 25,000 tons of estimated reserves or “dormant savings” at current prices, he said could be around $1.25 trillion.
The industry representatives meanwhile urged the government here today to stop unregistered dealers’ sales of bar gold even by Star Trading Houses if they do not operate in the gold and jewellery sector. Gold, it was argued, was not a dead asset and did not cause a drain on foreign exchange reserves if used for producing value added gems and jewellery.
Also, the industry felt that the high import duty on gold only led to prevalence of unofficial channels.