The Reserve Bank of India (RBI) further liberalised the Gold Monetisation Scheme
In an attempt to give momentum to the Gold Monetisation Scheme (GMS), launched by the Prime Minister (PM) Narendra Modi in 2015 with much fanfare, the Reserve Bank of India (RBI) further liberalised the GMS. Along with GMS, sovereign gold bonds and India gold coins were also launched in November 2015.
The regulator allowed those customers to who want to deposit bullion in their possession directly with either, Banks, refiners or collection and purity testing centers (CPTCs). Under the current arrangement it was mandatory for customers to first approach Bureau of Indian Standards (BIS) approved CPTCs.
After it was launched in 2015, GMS could mobilise only 16 tonnes of Gold, whereas the amount of private gold holdings in the country runs into millions of tonnes. This was largely because of banks’ apathy towards polularising GMS and also due to practical difficulties of banks in dealing with collection-hallmarking centers.
These centers had issued depositors purity certificate on gold deposited, and based on the centers’ certificate, a bank was supposed to open a deposit account and credit gold.
CPTCs sent the gold to a refinery which gave the final purity certificate and converted the yellow metal into bars. Banks, CPTCs and refineries had to sign a tripartite agreement for this earlier. Banks had been raising issues about the credit worthiness of CPTCs and were not comfortable in dealing with them for GMS.
After several rounds of meetings, the government accepted the banks’ demand. In view of this, RBI said in the circular on Friday that, “All deposits under the scheme shall be made at the CPTC. It also allowed Banks to use their discretion to accept gold as a deposit at designated branches, especially from big depositors.”
Temples, High Networth Individuals and entities like fund houses, trusts and even government entities would find it easier to deal directly with banks instead of CPTCs.
The RBI also further relaxed norms under the scheme by which banks, at their discretion, can, “allow the depositors to deposit their gold directly with the refiners that have facilities to carry out final assaying and to issue the deposit receipts (DRs) of standard gold of 995 fineness (purity) to the depositor.”
This suits to the entities holding Gold in large quantity like temples and other holders of precious metal. It is estimated that temples across India privately hold roughly 4,000 tonnes (or more) of gold and are capable of depositing gold in huge quantity under the scheme.
Several depositors had earlier complained that banks are not taking interest in accepting deposits under the GMS in many cities even from large depositors.
While reacting to RBI move, Prof Arvind Sahay, chairperson, India Gold Policy Center said, “Though it is a step in right the direction, it does not go far enough to mobilize sizeable quantity of Gold under the scheme. However, the goal of mobilizing sizeable quantity can be achieved with a holistic and systematic set of policy initiatives.
For example, there is nothing for the banks in the RBI announcement about how it improves the business case to mobilise gold. There is nothing even for the consumers, why should they deposit their jewellery with a bank or a refiner.”
One of the key reason for GMS not becoming popular among masses was Banks had hardly publicised that they run the GMS. Taking cue from this, the RBI in its circular issued on Friday said “Banks have to identify branches in all states and union territories where they can accept deposits”.
All designated banks have now been mandated by the RBI to give adequate publicity to the scheme through their branches, websites and other channels