The upcoming interim Budget will likely offer a fresh push to gold schemes, laying out plans to tweak existing ones and announce new products, as earlier efforts to draw people to park their idle holdings with banks yielded little.
The government is considering introducing a gold savings account that will enable banks to take deposits from customers in rupees but credit grams of gold into their accounts. Customers will get passbook facility and may have the recurring deposit option as well.
The government will also make suitable operational changes to the existing gold monetisation scheme (under which people deposit their gold holdings with banks and get an interest) to make it more attractive.
Similarly, it will likely consider hedging against any price risks that are associated with sovereign gold bonds.
It may also reduce the tenor of such securities from the current eight years and allow more flexibility to investors to exit early.
Some of these proposals were suggested by the Niti Aayog. Some other stakeholders, too, submitted ideas. A comprehensive gold policy is being planned, said a source. Some of these ideas may figure in the Budget, he added.
As for the gold savings account, the holders will deposit a sum of money and get gold worth the equivalent amount credited into their accounts, based on prevailing market prices. The minimum investment could be as low as one gram and every time one invests, it will reflect in the passbook. Initially, the account holder may get the option of redemption in the rupee term, based on the value of gold lying in their account at prevailing market rates. Typically, the account will provide every quality of holding physical gold except that it will be in the paper form.
The bank will likely pay an interest, in sync with what it gives under the monetisation scheme (typically 2.25% a year for 3-5-year investment). It may also be exempted from capital gains tax.
The plans are part of the broader effort to curb non-essential imports and contain their impact on both trade and current account deficits that exerts pressure on the rupee from time to time. Gold already attracts a 10% basic customs duty and any move to raise it to discourage imports is also fraught with risks of higher smuggling.
While gold imports were down by 15% up to July this fiscal, a sharp 93% spike in purchases from overseas in August drew policy-makers attention. Analysts have said current account deficit may worsen to 2.8% of GDP in 2018-19, against 1.9% a year before.
The gold schemes (monetisation, bonds and sovereign coins), launched in late 2015, haven t yet generated the desired response, though. The government is aiming to garner Rs 5,000 crore from these gold schemes in 2018-19, the same as in the last fiscal, but that represents just about 2% of the country s annual consumption. With renewed push, though, the mop-up can go up.
The limited number of collection and purity testing centres, more so in rural areas, and the unwillingness of housewives to get jewelleries having emotional appeal melted so that these can be deposited have dented the appeal of the gold monetisation scheme.
The scheme was launched to tap the massive gold stocks lying with Indian households, together the world s largest hoarders of gold. The households hold a record 23,000-24,000 tonnes of the precious metal, worth around $1 trillion.