RBI issues guidelines for gold monetisation scheme

Deepak Kumar | The Dollar Business

A month after the government announced the Gold Monetisation Scheme, the Reserve Bank of India (RBI) on Thursday issued guidelines for banks to implement the scheme in order to expedite the mobilisation of gold in the domestic market and thus reduce India’s dependence on gold imports. The RBI has fixed a minimum limit to raw gold (bars, coins and jewellery) deposits, which should be equivalent to 30 grams of 995 fineness. However, there is no maximum limit for gold deposits under this scheme. Banks will issue the deposit certificate in equivalence of 995 fineness of gold. RBI said that individuals can deposit gold under one of the three schemes - short term ranging between one to three years, medium term between five to seven years and long term between 12 to 15 years.         Under the scheme, only Indians (individuals, HUF, companies and trusts registered under the SEBI regulations) can make gold deposits. “There will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them,” SBI said in a statement. The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). The principal and interest of the deposit will be denominated in gold. “Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be and whichever is earlier,” RBI said. The banks will be able to sell or lend deposited gold to (MMTC) Metals and Minerals Trading Corporation of India, jewelers or any other bank participating in the auction. “Designated banks should put in place a suitable risk management mechanism, including appropriate limits, to manage the risk arising from gold price movements in respect of their net exposure to gold,” the regulator said. Any complaints against designated banks related to gold deposits, certificate, payment of interest will be handled first by the bank itself and then by the Reserve Bank’s banking ombudsman. “Indian Banks Association is finalizing the necessary documentation including the tripartite agreements to be entered into by the designated banks, CPTCs and the Refiners under the Scheme. The exact date of implementation will be announced by RBI in the next few days,” RBI said. The gold industry welcomed this initiative; however, said that inclusion of jewelers would have further benefitted the scheme. “Involvement of Jewellers would have given an additional boost to this scheme. But it seems that the government is worried about the Jewellers coming out with some scams, which is why only bankers and hallmarking centres are included right now,” Ketan Shroff, spokesperson of the India Bullion and Jewellers Association Ltd. (IBJA), told The Dollar Business. However, Shroff remained optimistic of its positive impact on the Indian industry. “In case of any movement in the dollar rupee rate, the biggest impact will be on gold policy itself. If the import is reduced, the government can do some relaxation in the custom duty. We had requested the government of stabilising the duty before the implementation of this scheme. But overall it will benefit the market significantly,” Shroff said.  

October 23, 2015 | 5:53pm IST.