Govt considering bullion bank to mobilise idle gold | Business Standard

Govt considering bullion bank to mobilise idle gold | Business Standard

Online comments posted on August 31, 2013:

It was reported in the media during July 2012 that, observing that gold imports are contributing substantially to India's current account deficit (CAD), an RBI panel was looking into the aspects of devising some alternative routes like bringing out the gold which already exists in the country. The panel was also to examine whether domestic stock of gold can be brought into the mainstream by devising appropriate financial instruments.
People’s emotional attachment to gold in metal form will come down only if the government is able to infuse confidence about the effectiveness of ‘paper gold’ (someone corrected me recently, it should be ‘electronic gold’!) as a store of value with easy liquidity. Awareness should also be created about the loss involved in abuse of gold for show-off purposes like gold-plating of roofs, statues and flag-masts or even in frequent re-making of ornaments.
India has every reason to unearth and put to productive use, the country’s gold stock scattered and hidden in households, religious institutions, moneylenders’ lockers and with people who conceal their wealth for various reasons. Present move, if accompanied with standardization of gold stock (with institutions and individuals) is capable of saving India from many of ots forex-related problems.
Reports indicate that RBI could at last persuade GOI to understand the significance of the domestic treasure of gold lying idle in the country and though the process is slow and reluctant, the powers that be is waking up. If we are able to  put at least some 10 per cent of the domestic stock of gold to productive use in the next 5 years, the country’s gold import bill will come down by 50 per cent. This can be achieved by fast-tracking the initiatives for:
  • Introducing gold-backed financial instruments which are not dependent on imported gold( The tiny instruments now available in the form of Gold ETFs and gold coins are indirectly dependent on import and have not attracted significant investor-interest)
  • Bringing a portion of household gold stock by offering some instrument like ‘Gold Bond’ backed by government guarantee to return solid standard gold at the time of redemption which could be, say, after 10 years and a small return in the interregnum
  •  Infrastructure, technology support and linkages for gold refining and certification facilities of international standard
RBI and GOI could consider even deficit financing for procurement of domestic gold as this could be the beginning of partial ‘Gold Standard’



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