Govt to pay 2.5% commission to banks to unlock household gold
22 January 2016
The government will pay banks a 2.5 per cent commission if they can get their customers part with their gold holdings under a revised gold monetisation scheme, the RBI said.
The move comes after the ambitious gold monetisation schemed, launched by Prime Minister Narendra Modi on 5 November with great fanfare, received a poor response from banks and the general public.
The scheme, aimed at unlocking the country's massive stash of gold, estimated at around 20,000 tonnes, including those with households and temple trusts, for channeling them to user industries through the banking system, however failed to click.
India, sitting on such huge stocks of gold, also remains the world's second-biggest consumer of the yellow metal after China. Gold is also the most valuable import into the country after oil.
With customers in no mood to part with their gold holdings and with little incentives for banks to motivate them, the gold monetisation scheme, launched on 5 November 2015, managed to collect only a few kilograms of gold.
Under the gold monetisation scheme, the public may deposit jewellery, bars or coins with banks so that it can be refined to meet fresh demand and thereby reduce the need for imports.
The depositor of gold would earn interest and, at the end of the deposit term, get the gold back in the form of bars.
Banks are allowed to accept gold under medium- and long-term deposit schemes. For the medium-term deposit, the tenure is 5 to 7 years and customers can earn 2.25 per cent interest per annum.
For long-term deposits, the tenure is 12 to 15 years and customers can earn 2.50 per cent interest per annum, the RBI said.
Withdrawals are allowed after a minimum lock-in period of three years for medium-term deposits and five years for long-term deposits, although such withdrawals will attract a penalty in the form of a lower interest rate, the bank said.
The government has now decided to pay participating banks a total commission of 2.5 per cent, including 1.5 per cent handling charges (including gold purity testing, refining, transportation, storage and any other relevant costs) and commission at the rate of 1 per cent, for the first year, from the date of launch of the schemre, the Reserve Bank of India said in a statement late on Thursday.
For the purpose of computing the charges and commission payable to banks, the rupee equivalent of the gold deposited shall be calculated based on the price of gold prevailing at the time of deposit.
The central government will notify the list of BIS certified CPTC / refiners under the scheme and shall be communicated to the banks through Indian Banks' Association (IBA).
The tripartite agreement will have enabling provision for direct deposit of gold with the refineries as well. Alternatively, banks may also enter into bipartite agreements with the refiners, stating out the terms of that arrangements besides the tripartite agreement, RBI stated in its release.