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India launches gold monetization scheme, response seen muted
By Manoj Kumar
Reuters
Wednesday, November 4, 2015
NEW DELHI, India -- Prime Minister Narendra Modi will launch on Thursday a programme to lure tonnes of gold from households into the banking system, but low returns and concerns over tax authorities hounding depositors may hinder a scheme aimed at cutting imports.
India's obsession with gold is rivaled only by China, with the metal used widely in wedding gifts, religious donations, and as an investment. The country has amassed about 20,000 tonnes of gold worth over $800 billion in family lockers and temples.
Previous attempts at mobilising this gold have been unsuccessful, but the prime minister is hoping higher interest rates paid will help it to succeed this time.
"The government wants to reduce the reliance on gold imports over time," a finance ministry official said.
Banks will collect gold for up to 15 years to auction it off or lend it to jewellers from time to time. They will pay 2.25-2.50 percent interest a year, higher than previous rates of around 1 percent.
But industry experts and bankers said many prospective depositors will not take up the scheme due to concerns that the tax department could question the source of gold, while others may find conventional bank deposit rates of 8 percent more attractive. ...
... For the remainder of the report:
http://in.reuters.com/article/2015/11/04/india-gold-modi-monetisation-id...
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