Modi calls on Indians to mobilise idle gold, cut imports

NEW DELHI: Prime Minister Narendra Modi on Thursday exhorted Indians to put thousands of tonnes of gold stacked away in households and temples into productive use, launching three programmes aimed at cutting massive imports of the metal.
The government hopes the gold monetization scheme will prompt families to deposit the metal in banks for interest while the sovereign gold bond programme will cut physical demand, though some experts reckon public response will be limited.
India’s obsession with gold is rivalled only by China, with the metal used widely in wedding gifts to brides, religious donations and as an investment. The country has amassed about 20,000 tonnes of gold worth over $800 billion in family lockers and temples.
In a bid to put some 20,000 tonnes of idle gold to productive use and cut imports worth $35-$45 billion annually, India today launched three schemes related to the metal, including domestically minted coins with the images of Ashok Chakra and Mahatma Gandhi.
The schemes launched by Prime Minister Narendra Modi also included one to convert jewellery and other similar yellow metal assets with the people into interest-bearing deposits, as also sovereign bonds with an eight-year tenure but with an exit option after five years.
Speaking about the schemes at his residence, Modi said gold has developed a tradition in the daily lives of Indians towards women empowerment. He also said with India-minted coins people will no longer have to depend on foreign sources.
“The gold scheme can take care of women’s gold while they are out on a vacation and are concerned about where to keep their gold,” he said, adding: “There is a tradition of gold possession in the Indian families. With this scheme the tradition will be preserved.”
He said goldsmiths, who have a great bond with people, can become the biggest agents of the schemes.
“India has no reason to be described as a poor country, as it has 20,000 tonnes of gold. The gold available with the country should be put to productive use. These schemes show us the way forward in achieving this goal.”
Ahead of the launch, the Reserve Bank of India (RBI), which will issue the bond scheme, fixed the issue price of gold for the first tranche at Rs.2,684 per gram, based on simple average closing price of gold of 999 purity (24 karat) for the week of October 26-30.
Under the deposit scheme, gold will be accepted at notified collection and testing centres. Banks will then issue certificates in equivalence of 995 fineness of gold under short term (1-3 years), medium (5-7 years) and long-term (12-15 years) schemes.
“The interest rate in the medium term bonds has been fixed at 2.25 percent and for the long-term bonds is 2.5 percent for the bonds issued in 2015-16,” an official statement said. These will be on behalf of the government. The short-term deposits will be on banks’ own accord.
In the bond scheme, the issuing body is the Reserve Bank on behalf of the central government, and will be denominated in multiples of gram(s) of gold with a basic unit of one gram. The minimum investment limit is two grams, with a maximum of 500 grams per person per fiscal year.
The tenure of the bonds — with an interest rate of 2.75 percent per annum payable semi-annually — will be eight years with exit option from the fifth year onward. They can also be traded in the bourses, and used as collateral for loans.
The gold coins, on the other hand, will be in a physical form and will have the national emblem Ashok Chakra engraved on one side and the image of Mahatma Gandhi on the other. Initially, it will be available at MMTC outlets in denominations of 5 and 10 grams, apart from a 20 gram bar.
To begin with, 15,000 coins of 5 gm, 20,000 coins of 10 gm and 3,750 bars have been earmarked.
As regards the two monetisation schemes, the government has permitted designated banks to sell or lend the accepted gold for minting India Gold Coins (IGC) by MMTC, as also to jewellers. They can also sell it to other designated banks.

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