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The dream Gold Bank of India would take care of transactions in gold and would look after the allied affairs. The bank may purchase gold for its own needs as well as for others, issue bonds against gold deposits and m..

04 Feb 2013

NEW DELHI(Commodity Online): The upcoming budget session may see a proposal to set up a gold bank under Reserve Bank of India, India's central bank, a report that has been published in the South Indian daily, Malayala Manorama speculated. The proposal can be traced back to the 1992 budget presented in the Parliament, but which eventually gathered dust.

The said proposal wanted a corporation or bank to take care of policy affairs in gold.

Now, with India trying out all the weapons in its arsenal to curb gold imports, including hiking of import duty by 2% to 6%, the idea of gold bank of India could well have found its resonance in time.

The report mentioned pre-budget talks gaining pace in this regard.

The dream Gold Bank of India would take care of transactions in gold and would look after the allied affairs. The bank may purchase gold for its own needs as well as for others, issue bonds against gold deposits and may even take measures to augment national reserves of gold.

The bank would also deal with export and import of gold, may issue gold as loan, involve in transactions of gold and may even oversee futures in gold.

It would act as a broker between those who want gold and those who intend to invest in it.

It is a golden assumption that India holds between its citizens 20,000 tons of gold of which 55% is held as jewellery, 35% as coins and bars and 10% used in industrial applications. This leaves 5% of scattered reserves or 5000 tons of gold idle.

Now, imagine if the financial potential of this chunk of segregated yellow metal can be leveraged. It would open up a sea of possibilities, especially in terms of financial maneuverability. But the question is who would bell the cat? Who on earth would pool this gold?

The dream Gold Bank of India!


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COMMENTS (1)
M G WARRIER
05 Feb 2013
It is comforting to see this report. Let me recall the concluding paragraph in my article “Gold management needs a makeover” (Hindu Business Line, April 13, 2012): "INSTITUTIONAL CHANGE The time is ripe for authorities to think in terms of dedicated professional institutions at the regional/state level, which will handle gold from a banking angle. An apex body should be equipped with linkages for import and export of gold and gold products with borrowing and lending capabilities. States like Kerala have successfully intervened in other similar sectors like chits/kuris and lotteries, which were also areas of exploitation by vested interests. Private players had to fall in line and function with discipline and self-regulation. Establishment of ‘Gold Corporations' with state participation could also be debated. Such an institution can act as a depository where the gold possession of individuals now in bank lockers and the pledged gold can find a safe shelter, provided the purity can be ensured, and the ‘Corporation' can find the resources and skill to deal in gold and retain the customers' confidence."
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