WGC suggest incentives for banks to push ahead gold monetization scheme

The World Gold Council (WGC) has presented a suggestion for banks to be boosted with incentives in order to promote the proposed gold monetization scheme, reports say. The Council noted that this move by the government would help ouch ahead the gold monetization scheme as there is a less likelihood of the Finance Ministry linking this gold scheme to the cash reserve ratio (CRR), reports say.

As part of the suggestions, the WGC noted that give India’s strong consumption of gold, banks could be allowed duty free import for a certain quantum limit which would be determined by the amount of gold collected under the monetisation scheme, reports say. Banks to be given ‘priority sector lending benefit’ for the gold lent to jewellers against the gold collected under the scheme, which the Council suggests would encourage banks to accept more gold deposits, increase growth of gold loans, and ultimately the banks’ profitability. Hedging of gold collected under this scheme is also noted as an incentive.

The government’s draft guidelines regarding the scheme banks would be allowed to pay interest on gold accumulated around 30 to 60 days after deposit, which the Council suggests should start immediately on account opening and cost of work in progress be considered into the interest rate offered. It would make it simpler for banks to ‘communicate to customers and encourage banks to reduce the time frame from customer deposit to use in monetisation through superior operations’ as per the Council, reports say. The WGC also noted that the interest rates could be on a par with FCNR (foreign currency non-resident deposits) - from 1.5 percent to 2.5 percent. The Council also mentioned that incentives should be rolled out to help improve creation of quality refineries, melting plants and assaying centres across India, which would reduce the need for transportation to bank branches, refineries and the government mint thereby improving cost efficiency.’ Also, the Council added that eight to ten accredited refineries and over 300 melting centres will be required reports say.