RBI tweaks gold deposit scheme provisions

Decides to change maturity period of gold deposit schemes ranging from six months to seven years

A month after the finance ministry proposed to link gold exchange traded funds (ETFs) of mutual funds with the gold deposit schemes run by banks, the Reserve Bank of India (RBI) on Thursday modified certain provisions of the Gold Deposit Scheme 1999.

With a view to making the gold deposit schemes of banks more attractive, RBI lowered the investment time limit of banks’ gold schemes and allowed Sebi-registered mutual funds and ETFs to participate in them. The maturity period of gold deposits would range from six months to seven years, said an RBI circular. Earlier, it was from three years to seven years.

According to the estimates of K U B Rao Committee, about 20,000 tonnes of gold is lying idle with people. The central bank wants to channelise the idle gold for productive purposes and also check unbridled gold imports.

From now on, banks will not need to obtain prior approval from RBI to introduce the scheme. However, they would be required to inform the central bank of details such as the names of the branches that operate the scheme.

Rising gold imports have been a major concern for the government, too, as they contribute substantially to the widening current account deficit (CAD).

CAD had touched a record high of 5.4 per cent of GDP in the July-September 2012 quarter. Gold imports till December 2012 stood at $38 billion. India imported gold worth $ 56.5 billion last year.