Prime Minister Narendra Modi on Thursday launched three schemes to lure tonnes of gold from households into the banking system and said that India is poor because gold is lying idle.
The Gold Monetisation Scheme (GMS), 2015 will offer option to resident Indians to deposit their precious metal and earn an interest of up to 2.5 per cent; while under the Sovereign Gold Bonds Scheme, investors can earn an interest rate of 2.75 per cent per annum by buying paper bonds.
Modi also unveiled the first ever Indian gold coin and bullion, bearing national emblem Ashok Chakra on one side and Mahatma Gandhi’s image engraved on the other side.
Initially the coins will be available in denominations of 5 and 10 grams. A 20 gram bullion will also be available through 125 MMTC outlets.
Speaking on the occasion, Modi said India has surpassed China as the world’s largest gold consumer, buying 562 tonnes of yellow metal so far this year, against china’s 548 tonnes. “People should take advantage of the golden opportunity to help India march to a golden period,” he said.
Observing that there is no reason for the country, which has 20,000 tonnes of gold lying idle with households and institutions, to remain poor, he said, with some efforts and right policies India can get rid of this tag of (poor nation).
Recalling India’s tradition of savings and culture of empowering women with gold, he said in a lighter vein, even the RBI governor Raghuram Rajan will have to recognise the difference between “arthashastra (economics) and grahshastra (home economics).”
Various schemes launched on Thursday will increase the availability of gold and bring down its import. India currently imports around 1,000 tonnes of gold every year, leading to outflow of forex reserves. Speaking at the occasion, finance minister Arun Jaitley said that “it’s essential to discourage gold imports.”
“Gold is a security, it gives you earning and now on it is going to be a part of our nation-building,” the FM added.
Previous attempts at mobilising this gold have been unsuccessful, but Prime Minister Narendra Modi is hoping higher interest rates paid will help it to succeed this time. “The government wants to reduce the reliance on gold imports over time,” a finance ministry official said.
Banks will collect gold for up to 15 years to auction them off or lend to jewellers from time to time. They will pay 2.25-2.50 percent interest a year, higher than previous rates of around 1 percent.
But industry experts and bankers said many prospective depositors will not take up the scheme due to concerns that the tax department could question the source of gold, while others may find conventional bank deposit rates of 8 percent more attractive.