Gold council lauds plan to paperize, lend, and suppress price of Indian public's gold


Gold Scheme to Help Monetise Privately Held Gold Stocks, World Gold Council Says

From the Press Trust of India
via The Times of India, Mumbai
Wednesday, September 9, 2015

NEW DELHI -- Welcoming the Cabinet's approval for gold schemes, the World Gold Council today said this would help monetise privately held gold stocks and make precious metal an integral part of the financial system.

It also demanded that the gold bond and monetisation schemes should be made attractive for customers and then well-marketed.

The Cabinet today cleared a gold monetisation scheme aimed at tapping a part of an estimated 20,000 tonnes of idle gold into the banking system and a gold bonds scheme under which the government will be issuing sovereign bonds as an alternative to the precious metal.

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"The Union Cabinet's announcements reflect both a very practical approach and a long-term view of gold," World Gold Council India Managing Director Somasundaram PR said in a statement. "The question is no longer whether the scheme will work but how to make it attractive for customers."

"The scheme must be well-marketed, promoting the attractive features that individual banks may include in the design of their offer within the monetisation framework to ensure that household savings in gold can be tapped by the banking industry. This will pave the way for a more active and larger role for Indian banks in bullion," he added.

Through the monetisation scheme, gold in any form can be deposited with banks for a period of one to 15 years earning interest while redemption will be at the prevailing value at the end of the tenure.

Somasundaram said this is a step toward gold becoming an integral part of the larger financial system and a fungible asset class in its own right.

This scheme will drive orderly recycling and enhance transparency, benefiting millions of households and the macro economy, as it has the potential to translate gold savings into economic investments.

On the sovereign gold bond scheme, Somasundaram said this will allow savers to sell or trade bonds easily on commodity exchanges, and key features, such as the ability to use them as collateral for loans and capital gains tax treatment similar to gold, are very thoughtful and timely.

"Any step that increases consumer choice and improves the fungibility of gold is good," Somasundaram said.

In the long term, he said, the scheme will help monetise gold stocks held privately and put them to work for the Indian economy.

India's gold demand stands at 800-1000 tonnes annually, of which almost the entire quantity is imported.

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