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The gold monetisation scheme announced by Prime Minister Narendra Modi on November 5 is off to a tepid start because the infrastructure for the scheme is not fully in place and banks are awaiting clarifications from the government.
The scheme aims at monetising an estimated 22,000 tonnes of gold idling with households and temples. Owners can go to certified hallmarking centres to melt their gold, test its purity and be issued a certificate, based on which banks will open gold deposit accounts.
“There are several things that need to be clarified for internal accounting. We expect these will come in the form of a Reserve Bank of India circular,” said a banker who did not wish to be named.
“Since these deposits will be on behalf of the government, there has to be a formal circular on how testing and refining expenses will be reimbursed to banks. Also, we need clarity over tax deduction at source.”
For short-term deposits, testing, melting and refining costs are to be borne by banks, but for medium and long-term deposits the government will pick up the tab. “We have received inquiries from temple trusts for gold deposits but we have not yet finalised anything yet,” the banker said.
The Bureau of Indian Standards has certified 33 hallmarking centres in the country to act as collection and purity testing centres for the gold monetisation scheme. Five gold refineries have also been certified. Banks are in the process of signing tripartite agreements with testing centres and refineries.
Banks and refineries are not comfortable working with small hallmarking centres. The process is also taking time because the collection and purity testing centres must submit bank guarantees.
According to sources in hallmarking industry, a handful of banks have signed tripartite agreements. Two Gujarat-focused public sector banks have signed agreements with collection and purity testing centres in the state and a local gold refinery.
A bank will have to sign agreements with several collection and purity testing centres and refineries to attract depositors from different parts of the country.
Bankers expect at least four tranches of gold bond issues by March, which will widen investor choice. Sovereign gold bonds carry a 2.75 per cent annual interest on the initial investment.
Teething trouble
Infrastructure problems have led to a slow start for gold monetisation:
