Mon, Oct 26, 2015 - Page 15 News List

India seeks to turn gold hoards into economic strength

Reuters, NEW DELHI

A program to attract gold owned by households into a bank deposit scheme to monetize the precious metal could be ready in weeks, Indian Prime Minister Narendra Modi said yesterday, a step aimed at cutting expensive imports.

The scheme would allow people to put their gold into banks in return for interest payments in an attempt to mobilize thousands of tonnes of the metal sitting idle in Indian households.

Indians prize gold as gifts and as a way of storing wealth. The country consumes nearly 1,000 tonnes of gold every year, most of it imported, and gold is the second-biggest expense on the import bill after oil.

In a radio address, Modi said the program should be ready before Dhanteras next month, a festival when it is considered an auspicious period to buy gold.

“Please, don’t let your gold be dead money,” Modi said. “Gold is very important for the country. Gold can become an economic strength for us.”

Huge gold imports were blamed for pushing the country’s current account deficit to a record US$190 billion in 2013, prompting the government to hike its duty on imports to 10 percent, an all-time high.

On Thursday last week, the Reserve Bank of India told banks that they can tap idle gold jewelry and bars held by temples and households to cut the nation’s reliance on imports.

Designated lenders will be able to accept deposits of the metal under short and long-term plans, allowing Indians to earn interest, the RBI said in a statement. The banks will be free to sell or lend the gold to jewelers, thereby boosting supply.

The government’s gold monetization plan will replace an existing deposit scheme, the RBI said, adding that interest will be denominated in bullion.

Additional reporting by Bloomberg

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