The Indian consumer’s affinity for gold has been sought to be addressed by the draft Gold Monetisation Scheme (GMS) announced in the Union Budget 2015-16.
As the world’s largest gold consumer, Indian demand was at 843 tonne in 2014, with most of it being imported. World Gold Council (WGC) estimates that Indians hold around 22,000 tonne of the yellow metal. Bringing even a part of this into the system through the GMS would help reduce import dependence.
The government was receiving suggestions from industry till June 2, 2015. The GMS aims to bring Indian private holdings of gold into circulation as also provide gold owners with a return as also do away with storage and security risks. WGC said the scheme can provide a fillip to the gem and jewellery sector by making gold available as loans from the banks. “Both directionally and in terms of content, this draft reflects a practical approach,” Somasundaram P. R., Managing Director–India, WGC said.
The draft guidelines envisage using 350 hallmarking centres as a starting point for customers to deposit gold which may be inadequate to address demand. With more than 2,000 bank branches already accepting gold as collateral for loans, WGC has recommended that bank and NBFC branches be allowed to accept gold deposits directly.
The proposed scheme is to replace the scheme in existence since 1999 but which has garnered a mere 40 tonnes of gold offering a 0.75-1 per cent rate of interest. Industry watchers expect a rate of 3-6 per cent to attract consumers.
“A significant make-or-break factor for the scheme will be the interest rate,” Ashok Minawala, former Chairman, All India Gem & Jewellery Traders Federation, said, adding. “The earlier scheme’s poor interest rate did not work and the new one would certainly have to better it to incentivise gold monetisation.”
In a report, CARE Ratings said, “educating consumers about the benefits of the scheme will be crucial, as it will be offering them attractive interest rates to part with their gold holdings.”
