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MMTC Pamp urges government to reduce minimum deposit for opening account under gold deposit scheme

The scheme, which was launched in 1999, stipulates a minimum deposit of 500 gm (1/2 kg) which takes it beyond the reach of most households.

, ET Bureau|
Nov 04, 2014, 04.00 AM IST
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The scheme, which was launched in 1999, stipulates a minimum deposit of 500 gm (1/2 kg) which takes it beyond the reach of most households.
The scheme, which was launched in 1999, stipulates a minimum deposit of 500 gm (1/2 kg) which takes it beyond the reach of most households.
NEW DELHI: Gold and silver refiner MMTC Pamp has urged the government to reduce the minimum deposit required for opening an account under the gold deposit scheme, arguing that such a move will help bring gold stock held by gene ral public in circulation, thereby reducing India’s dependence on imported gold and narrowing its current account deficit.

The scheme, which was launched in 1999, stipulates a minimum deposit of 500 gm (1/2 kg) which takes it beyond the reach of most households. MMTC Pamp, a joint venture between state-run MMTC and Switzerland’s PAMP, said the scheme will become more attractive for general public if the minimum requirement was reduced to 40 gm.

"The government is aiming to reduce the current account deficit (CAD). We feel if the scheme is able to tap 1per centof the 25,000 tonne gold lying in bank lockers in the country, it will balance the huge gap between demand and supply and bring down CAD. The Reserve Bank has said the proposal looks alright and we are now waiting for the notification by the finance ministry," said Rajesh Khosla, managing director, MMTC Pamp.

India imports 600-650 tonne of gold per annum to meet 800-900 tonne of domestic demand. As India’s first London Bullion Market Association (LBMA) good delivery refinery accredited for gold and silver, MMTC Pamp aims to be the enabler for the gold monetisation scheme by carrying out collection, purity verification and even acting as the handler of gold for banks.

CAD, which is the excess of foreign exchange outflows over inflows, stood at $7.8 billion in the first quarter of 2014-15.

After oil, gold is the second-largest item on India’s import bill. Rising CAD has weighed on the Indian rupee, which was 61.50 to a dollar on Monday.

Khosla said his company proposed the minimum requirement of 40 gm after carrying out a survey of 5,000 households across the country.

"In 15 years, the government was able to garner only 15 tonne of gold. Why didn’t the scheme work and consumers go for it is what we asked the people. Here, 60 per cent respondents said that if we get down the minimum deposit from 500 gm to 40 gm, they will deposit gold," he said.

Khosla said people can deposit a broken bangle or jewellery with a missing stone that is lying in the bank locker.

"As a scheme, you give us the gold and we will determine the gold content in your presence and get you a value. From here the banking system takes over and manages it as a currency. One can earn 3.5per cent tax-free interest annually for the gold deposited, if the scheme is implemented," said Khosla. He said two Mumbai-based banks have already expressed interest in the proposal." Banks don’t like gold, but paper gold," he said. Since the past one year, MMTC Pamp has been encouraging small refiners and jewellers to sell scrap or swap it for gold. It has also set up two purity verification centres in Delhi and will be opening three more in Hyderabad, Bengaluru and Delhi this year.

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