‘Gold monetisation scheme likely to be tweaked’
But this discount was more of a B2B phenomenon, rather than B2C, said sources in Zaveri Bazaar.
The aim is to harness part of the 25,000 tonnes of gold in various forms held by residents under the GMS and reduce dependence on imports of the metal, in turn, narrowing the current account deficit. Net imports of gold were 766 tonnes in 2018 and 837 tonnes in 2017, according to Metals Focus. Gold is among the top five imported commodities after crude oil and electronic equipment.
Surendra Mehta, national secretary of India Bullion & Jewellers Association (IBJA), and James Jose, a Kerala-based gold refiner, cited unknown sources in New Delhi having told them of such a meeting.
“We heard of a meeting held on Friday where changes to GMS were reportedly suggested,” said Mehta. “The nitty-gritty of the discussion is not known.”
While confirming he’d heard of the meeting, Jose added that for GMS to succeed among households, banks’ core banking solution had to be equipped with provisions for opening of metal accounts and crediting of interest in the form of gold or cash in them.
“If a potential GMS client walks into a bank branch, there’s little guarantee that he would walk out with a metal account thanks to CBS not having provisions for starting a metal account,” Jose said. “That’s one of the main reasons why GMS hasn’t taken off among residents, except for large temple trusts which have been among main depositors of around 6 tonnes.”
According to ICICI Bank’s website, “.... the deposit will be denominated in grams of gold with purity of 995. The deposit (minimum 30 gm or raw gold) will help the depositor earn interest decided by the central government and notified by the RBI from time-to-time.”
Normal rate of interest under GMS for medium-term gold deposit (5-7 years) and long-term gold deposit (12-15 years) is 2.25 per cent and 2.5 per cent, respectively. Interest rate for both schemes is decided by the government, where interest and principal are paid in rupees. For short-term gold deposit scheme (1-3 years), the interest rate is decided by the authorised bank, along with principal, is payable in INR or gold.
Trades at a discount
On Friday, when gold hit record highs in Indian prices, it traded in the secondary market at a percentage point discount to LBMA gold, said Sudheesh Nambiath, head, India Gold Policy Centre at IIM-A. But this discount was more of a B2B phenomenon, rather than B2C, said sources in Zaveri Bazaar.
All India Gem and Jewellery Domestic Council (GJC’s) 22 carat published rate was Rs 3,331 per gram (ex GST). Back of the envelope calculation shows that if this were converted into 24 carat, the price would be Rs 3,615. On commodity exchange MCX, the near month hit a high of around Rs 3,447 a gram, which is way below Rs 3,615 on the spot market.
Nitin Kedia of Kedia Commodity, however, said that investors who had purchased bars and coins six months ago were selling the same in the market and booking profit.