The authorities is weighing a proposal to slash the minimal deposit requirement below its gold monetisation scheme (GMS) in phases to induce a lot of individuals to park their idle holdings with banks.
The scheme’s efficiency has seen some enchancment in recent times, however remains to be a far cry from the lofty targets set by the federal government.
The minimal threshold could possibly be decreased to five grams (value Rs 25,690 at present costs in Delhi) from ten grams now and, within the longer run, to only one gram or much less in phases, sources instructed FE. Last yr, the federal government trimmed the minimal deposit to 10 grams from 30 grams, as the sooner threshold was thought-about too excessive to attract frequent households. But even the present restrict, analysts say, is proving to be restrictive for a lot of in rural India, which accounts for a bulk of the nation’s whole gold holdings, estimated to be at the very least 25,000 tonne, value over $1.6 trillion.
Similarly, individuals wishing to deposit gold as much as 50-100 grams every in banks is probably not requested any query by the taxman.
These are among the many proposals being thought-about by the federal government earlier than it finalises the subsequent set of modifications to the GMS to spice up mop-up below the scheme and discourage imports of the dear steel.
Of course, a few of these proposals had been mentioned earlier than the federal government notified the final set of modifications to the GMS in April 2021. Although they weren’t a part of the modifications then, a few of these are nonetheless being deliberated on, mentioned one of many sources.
The recent push for monetisation comes at a time when gold imports, having remained subdued for some years, jumped 33.4% in FY22 from a yr earlier than to $46.2 billion, reviving fears of an extra spurt within the present fiscal as properly in mild of elevated retail inflation.
“The proposals for the next round of changes to make the GMS more attractive are being discussed. A final decision will be taken by the finance ministry in due course,” a senior authorities official mentioned.
A senior business government steered that the present coverage focus might be on bolstering infrastructure (testing and melting centres, and so on) in rural areas, other than enterprise an enormous marketing campaign, led by banks, to advertise the GMS. “Once this is done, there should be targeted focus on wooing temple trusts which are sitting on huge amount of gold. But for this, the tax department should also clearly state that they won’t ask questions about the source of gold or seek to unduly probe the accounts of the trustees and others following the deposits,” he added.
Just earlier than the Covid outbreak in 2020, the federal government had garnered solely 21 tonne of gold by way of the monetisation scheme in over 4 years since its inception. The sovereign gold bond programme had witnessed a larger mop-up till then, equal of about 30 tonne of the dear steel. Both had been launched in November 2015 by Prime Minister Narendra Modi to discourage gold imports to curb their debilitating impression on commerce and present account steadiness.
While the GMS is aimed toward tapping family shares, by way of gold bonds, the federal government desires to wean away traders from the purchases of the bodily steel to “paper gold”.
During the pandemic, the gold bonds turned extra enticing than another asset lessons. In August 2021, finance minister Nirmala Sitharaman instructed Parliament that the federal government had collected Rs 31,290 crore (equal of over 61 tonne of gold at Saturday’s value) from the bond scheme since its launch. Still, the mixed collections from the gold schemes symbolize solely a tiny fraction of the nation’s consumption throughout this era. India’s gold demand in a traditional yr stands at 700-800 tonne.
The annual rate of interest on gold parked with banks below current GMS is as much as 2.5% (which varies, relying on the tenure of deposits).Currently, a restricted variety of assortment and purity testing centres (and their lack of desired effectivity), extra so in rural areas, and the unwillingness of housewives to get jewelleries melted in order that these will be deposited have dented the enchantment of the gold monetisation scheme. With renewed push, although, the mop-up below the monetisation scheme can go up, analysts have mentioned.
Nevertheless, the present GMS has witnessed a marked enchancment upon an earlier one below which the federal government had garnered solely two tonne of gold between 1999 and 2015.
Source: www.financialexpress.com”