Inter-ministerial group to meet on making gold an asset class

retailj
By retailj April 8, 2019 17:39

Inter-ministerial group to meet on making gold an asset class

Mumbai: India will hold a top ministerial meeting early this week on giving gold the status of an asset class, a move that seeks to reduce the dependence on imports by boosting the circulation of an estimated 25,000 tonnes of the metal lying locally in jewellery or coin forms.

The status of an asset class would give Indians the opportunity to capitalise their gold and make it as liquid as the stock of a listed company. The government is working on having an India gold delivery standard, similar to gold that’s certified by the London Bullion Market Association (LBMA), the world’s standard setter for the metal.

The meeting is scheduled to be held in New Delhi, two persons aware of the development said. The Bureau of Indian Standards, or BIS, would play a key role in making gold an asset class, said one to the persons.

Residents holding gold jewellery or coins would be able to get these melted into 995 or 999 purity bars by accredited refiners, who would issue a certificate to them bearing the title of goods, purity and serial number embossed on the bars, which can be traced to their owner.

“The nature of this certificate — whether dematerialised — among other issues, will be discussed by the inter-ministerial group,” said one of the persons mentioned above. The certificate will be transferable like a share certificate or a property deed. When the price rises, a resident can simply transfer the certificate and capitalise the gold, much like they do when a share price rises. S/he could also deposit the gold bars with banks under the Gold Monetisation Scheme and earn interest instead of keeping it idle. Currently, when a person wishes to sell gold ornaments to a jeweller, the latter purchases them at a discount to the prevailing market rates.

“Once gold becomes an asset class, the seller would receive the prevailing market rate for gold and be incentivised to capitalise her holding,” said the other person. “This will also increase the supply of domestic gold and reduce the need for imports.”

Net official imports of gold stood at 766 tonnes in 2018 and 837 tonnes in 2017, according to Chirag Sheth, senior consultant (South Asia), Metals Focus, the data provider to the World Gold Council. Jewellery consumption in 2018 was 598 tonnes and in the year before was 602 tonnes.

Recognising gold’s role in widening the current account deficit, the NDA government has been working to make the metal an asset class. It launched a sovereign gold bond (SGB) scheme and revamped the erstwhile gold deposit scheme in 2015.

SGBs allow investors to subscribe to bonds that carry a coupon of 2.5 per cent on initial investment. In 2013, the UPA government increased the import duty on gold five-fold in stages to 10 per cent to rein in the burgeoning current account deficit.

Courtesy: Economic Times

retailj
By retailj April 8, 2019 17:39
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