India’s gold monetization scheme fails to gain widespread acceptance

NEW DELHI (Scrap Monster): The much anticipated gold monetization scheme launched by the Indian government has failed to evoke significant response from retail customers. Although a few temples joined the scheme by depositing their gold offerings, the scheme is yet to receive widespread acceptance among retail customers. Incidentally, Indian households are believed to hold huge stashes of gold.

Gold Monetization Scheme

The scheme was introduced with the intention of converting tons of idle gold and jewellery held in Indian households and temple vaults into to deposits with banks. Resident Indians are allowed to make deposits under this scheme. The minimum deposit quantity is 30 grams of 995 fineness raw gold, whereas there is no maximum limit. Designated BIS certified Collection and Purity Testing Centres (CPTC) are authorized to accept gold from customers. The scheme offers returns of up to 2.5% per annum on idle deposited gold. Deposits ranging from 5-7 years will be paid an interest rate of 2.25%, whereas long term deposits ranging from 12-15 years will be offered 2.20%. The accounts denominated in gold are maintained by the Reserve Bank of India.

Slow start

The Finance Ministry has held several meetings with stakeholders to discuss about the lukewarm response to the scheme. Upon government agreeing to certain demands put forward by the temple authorities, a few temple trusts have deposited gold into the scheme. Altogether, eight temples including 2 in Mumbai have made gold deposits so far. For instance, The Tirumala Tirupati Devastanams (TTD)- the trust which manages the Balaji or Sri Venkateswara Swamy Temple in Tirupati in Andhra Pradesh, India has deposited over 1,300 kilograms of pure gold bars with the Punjab National Bank (PNB). However, lack of promotion of the scheme among general public has resulted in cold response to the scheme from Indian households.

Lack of push

The banks in the country are yet to promote the scheme aggressively, as they are still awaiting clarification by the government on certain accounting related issues raised by them. The bank representatives had discussed the issue with senior Finance Ministry officials in a meeting held last week. A decision on the matter is expected soon. According to government, promotion of the scheme by all banks in the country is essential for the success of the scheme. It must be noted that strong participation by banks had ensured the success of a similar scheme launched by Turkey years back.

Certification centers

Initially, the Indian Finance Ministry had stated that the scheme would be launched with at least 100 active certified hallmarking centers. However, out of the 375 hallmarking centers in the country, only around 50 centers have been certified so far by the Bureau of Indian Standards (BIS) to act as collection centers. In addition, only 7 refineries across the country have been certified to receive gold collected by hallmarking centers.

Also, BIS had allowed jewellers to accept gold deposits as part of the scheme. However, the participation by jewellers has been meager, as it requires investment of huge sums of money to meet the norms specified by the agency.