Interest on gold deposits may be exempt from tax

If customers agree to deposit gold with banks, the centres will issue purity and weight certificates and the fees will be paid by banks.

Half the hallmarking centres are set up by jewellers, so they will market the scheme, something not allowed now.

Sudheesh Nambiath, senior analyst, precious metals, GFMS, Thomson Reuters, said, “The operational aspect of the scheme is on a loose thread until the BIS steps in to bring faith in the hallmarking centres. It is too optimistic to consider banks will accept all 350 centres as purity testing centres unless they own the risk after the fire assay test. Secondly, three or four hours of fire assay is a too short time for credible work. Thirdly, NABL accreditation should be applicable on multiple processes, that again will bring down the number of refineries to single digits.”

Interest will be payable after 30 or 60 days of opening the account. The scheme will have a maturity of one year and multiples of that with a facility to break the lock like in normal bank deposits.

Banks will be able to keep gold with refiners, which are 32 at present. While lending gold to jewellers, banks will have to recover costs and keep a margin for profit.

Currently, gold can be imported on consignment basis with 1.2 per cent lease rent and hence banks will prefer to pay 1 per cent interest to avoid arbitrage. Interest rates for jewellers for gold loans at present are in the range of 4-4.5 per cent.

One banker involved with the existing gold deposit scheme said the new scheme could succeed because the logistics of collecting gold and refining it had been taken care of by involving hallmarking centres and reducing the minimum deposit from 500 gm to 30 gm.

The facility to use gold as reserve, if provided, will ensure the gold mobilised is not idle.