I have written about the benefits of this scheme to the citizens. This article is about the benefits / utilization of gold. As mentioned in my article “How does Gold monetization scheme work? Is it really useful?“, the banker issues gold certificate against collecting physical gold. This gold should find some place in the economy, otherwise, there is no difference between individuals keeping them in their safe locker and the banker keeping them in their custody.
Utilization of Gold
- CRR/SLR: To incentivize banks, it is proposed that they may be permitted to deposit the mobilized gold as part of their CRR/SLR requirements with RBI.
- Foreign Currency: Banks may sell the gold to generate foreign currency. The foreign currency thus generated can then be used for onward lending to exporters / importers.
- Coins: Banks may convert mobilized gold into coins for onward sale to their customers
- Exchanges: Banks to buy and sell on domestic commodity exchanges, where mobilized gold can be delivered
Lending the Gold to the Jewellers
- Gold Loan Account: The jewellers, on the basis of the terms and conditions of the banks, will get a Gold Loan Account opened at the bank.
- Delivery of gold to jewellers: When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from the refiners. The banks will in turn make the requisite entry in the jewellers’ Gold Loan Account
- Against such loan, banker will collect interest from Jewellers.
India is one of the world’s largest consumers of gold, importing as much as 800-1,000 tonnes each year. Though stocks of gold in India are estimated to be over 20,000 tonnes, this gold is neither traded nor monetized. If such gold is brought into the economy, then the import of gold can be substantially reduced.
The government is seeking the feedback about the scheme from general public, before making it operational. The last day for submitting feedback on draft guidelines with the finance ministry is 2nd June 2015.
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