India to Allow Citizens to Deposit Gold in Banks

Bloomberg reported that India plans to allow citizens to earn interest by depositing gold in banks. The move is reportedly aimed at reducing the country’s imports by “tapping idle bullion lying with households.”

As quoted in the market news:

Individuals and institutions can deposit a minimum of 30 grams in the form of bullion or jewelry under a so-called gold monetization scheme, according to a draft document released by the government on Tuesday. The banks can set the interest rate on the deposits and the metal mobilized may be loaned to jewelers, the government said.

Success in drawing out a part of the more than 20,000 metric tons of gold lying with households and institutions like temples may help India lower dependence on imports and ease pressure on the current-account deficit. While the plan proposes to ensure steady supply of bullion to jewelers, banks may benefit from a new business in a country where gold is bought during festivals and marriages as part of the bridal trousseau or given as a gifts in the form of ornaments.

Prithviraj Kothari, vice president of the India Bullion and Jewellers Association, commented:

A lot of households have scrap and broken jewelry with them and the new scheme should help them to deposit their stocks with the banks and get easy money. The interest rates offered should be more than 3 percent to make Indians part with their gold.

Click here to read the full Bloomberg report.