Guidelines on Gold Monetization Scheme to be issued in May

NEW DELHI (Scrap Monster): The Indian government is likely to issue guidelines on the newly announced ‘Gold Monetization Scheme’ by May. Speaking to reporters, Finance Secretary Rajiv Mehrishi stated that the government intends to issue the guidelines at the earliest. However, it doesn’t expect the same to be framed before May this year.

As part of efforts to monetize stashes of gold in Indian households, the government had announced multiple schemes during the recent Budget. According to Arun Jaitely, Finance Minister, the newly formulated monetization scheme is intended to replace the present gold deposit and gold metal loan schemes. It allows gold depositors to earn interest and jewelers to avail loans in their metal account.

Meantime, jewelers and gold traders welcomed the revised scheme, saying that it would help to increase the supply of gold to the jewelry industry. This in turn would reduce the trade’s dependency on gold imports. Experts believe that gold imports into the country may see a sharp cit of up to 35% once the scheme is in place. According to traders, the gold monetization scheme is likely to provide big boost to the Indian jewelry manufacturing sector. The estimated 20,000 tonnes of idle gold may now become available through banks to jewelry makers in the form of metal loans.

The success and failure of the scheme depends on the rate of interest offered on gold deposits. Unofficial sources indicate that the returns from the gold monetization scheme would be as high as 3%. If banks are able to offer gold to jewelry industry at a lower rate than at what they currently import, the chances are most likely that gold supply through monetization schemes may consolidate going forward.

The failure of gold monetization scheme may set fire to gold smuggling in the country since duties on gold imports still remain high at 10%.