With nearly 22,000 Tons of gold locked in the house-holds, and India consuming 900-1000 Tons of Gold Annually, here is some food for thought:
1. There can be three types of schemes: Gold Against Gold, Gold Against Interest, and Gold Against Security.
a. Gold against Gold is a scheme that allows the customer of a bank to deposit gold to get fresh or new gold against the tattered, old ones
b. Gold against interest is when banks pay interest at nominal rate for the gold deposited in a bank
c. Gold against security is a type of collateral that is needed to take certain bank loans
2. The Gold Value deposited in the bank can be used to provide hedging to the bank against only single portfolio.
3. It is like trading in the stock market. The gold does not move physically, but the gold value is traded against Forex Currencies and helping exporters/ Importers, and as well as hedging risks.
4. I do not find any reason to link gold deposits to SLR/ CRR, but to provide these three schemes, a certain amount of gold can be deposited as a threshold first, and then the interests can apply.
5. The return on gold value can start after a time line of 30-45 days.
6. The minimum threshold for acceptance can be 10-20 grams of gold or a monetary value of 50,000 INR.
7. The rate of interest can be more than interest of the FCNR or Foreign Currency Non-Resident Deposits, approximately in and around 3-5% for incentivizing the Gold Schemes.
8. The Gold Value in the banks can also be used to buy other gems and jeweleries for the banks.
9. There can be a certain amount of gold that can be deposited in the Central Bank RBI, when a threshold is achieved.
10. If the gold passes a certain carat or quality test, it can be used to circulate in the market. But, this gold amount can be used to do so, only when the deposit comes from the sellers.
1. Please do not link gold to sovereign bonds initially or the even certain bond market. Kindly use it in the debt market, at first. Let the schemes mature for a period of 6-12 months.
2. Inviting a gold scheme without proper use of the gold value will hamper growth of interest. We cannot allow the banks to provide interest where the revenues are not earned.
3. Please ensure that the returns are made in such a way, that the gold market does not become the next housing bubble. At this point I would like to share that the gold schemes should not be referred to sellers for more than once that is not traded against a loan or loan of loans.
4. The gold value can be traded in the stock market such that the gold schemes are attractive enough when the gold value is hedged against various schemes.
5. The interest rates for the first three schemes can be different as well. All the three gold schemes can have different interest rates.