A gold scheme launched by the Prime Minister of India, Narendra Modi, last year, which hoped to monetize immense wealth sees no ray of sunshine.
While announcing the scheme in his budget speech last year, Finance Minister Arun Jaitley had hoped that by depositing over 20,000 tons of gold stored in homes, we could help the government reduce imports, and in turn use the gold to improve the economy
The Gold Deposit Scheme allows earning an interest rate of 2%-2.5% by depositing at least 30 grams of gold with the government banks.
Until May this year – about 2,891 kg of gold was deposited. Out of which, about half of it came from a single source: the Tirumala Tirupati trust that deposited about 1,311 kg of gold under a three-year short-term gold monetisation scheme. Even after repeated push by the government to the banks to encourage bankers to invest their gold, seems to fall on deaf ears.
At that time, Jaitley said: “The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. Banks/other dealers would also be able to monetize this gold.”
Gold monetization scheme also affects people who try to keep their belongings personal, as if the value of total gold exceeds over 50K rupees, then they will have to disclose their PAN numbers to the banks. This can be seen as a major hindrance and a strong reason why people aren’t interested in depositing their favorite metal.
While the economists think that apart from the cultural and emotional connection with the Gold, one of the main reason the gold scheme is not taking off yet is ‘because gold is seen as an essential collateral among many households who may not want to part with it under a contract.