DMPQ- What are the major objectives of Gold monetization scheme? How it’s going to benefit india’s financial situation?

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The Gold Monetization Scheme is a welcome step initiated by the Government of India to  unlock the unused and idle gold lying in households and institutions and bring them into  mainstream and release the capital locked in for use in the economy for its development.  The key objectives of this scheme are stated as under:

  • To mobilize the gold held by households and institutions in the country.
  • To provide a fillip to the gems and jewellery sector in the country by making gold available as raw material on loan from the banks.
  • To be able to reduce reliance on import of gold over time to meet the domestic demand.

According to the government, gold deposit accounts will utilise the 20,000 tonnes  available within the country and help in cutting down the 800-1,000 tonnes of gold the  country ships every year. Among the regulatory issues for banks, it said some certainty on  use the gold deposits as part of their Cash Reserve Ratio (CRR) and Statutory Liquidity’  Ratio (SLR) requirements would be helpful. Irrespective of the difficulties, it underscored  that the scheme holds great benefits on the macro front, saying, it can lower gold imports by  bringing into circulation domestically-held idle gold, thus, helping the external balances.  Additionally, the easy availability of the precious metal can reduce costs for jewellers and  increase the exports. Seeking to mobilise idle gold worth up to Rs 60 lakh crore held by  households and institutions, the government proposed a new scheme offering tax-free  interest on depositing the yellow metal with banks. The draft of gold monetisation scheme  also provides for incentives to the banks. Individuals and institutions can deposit as low as  30 gms of gold, while the interest earned on it would be exempt from income tax as well  as capital gains tax.

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