Banks free to fix interest rates on gold deposit scheme: RBI

Mumbai: Reserve Bank Wednesday issued guidelines for the Gold Monetisation Scheme that allow banks to fix their own interest rates on gold deposits.

The RBI notification in this regard comes ahead of the formal launch of the scheme by Prime Minister Narendra Modi on Novermber 5.

The gold deposit scheme is aimed at mobilising a part of an estimated 20,000 tonnes of idle precious metal with households and institutions.

As per the guidelines, banks will be free to set interest rate on such deposit, and principal and interest of the deposit will be denominated in gold.

"Redemption of principal and interest at maturity will, at the option of the depositor be either in Indian Rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. The option in this regard shall be made in writing by the depositor at the time of making the deposit and shall be irrevocable," it said.

The interest will be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit, it said.

"The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes. While the former will be accepted by banks on their own account, the latter will be on behalf of Government of India," it said.

The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR), it said.

However, it said, the stock of gold mobilised under the scheme by banks will count towards the general SLR requirement, a move that will provide additional capital to banks for lending towards productive sectors.

The CRR is the portion of the total deposits, which has to be kept with RBI in cash, while SLR is the portion of deposit compulsorily parked in government securities.

Currently, banks have to set aside 4 percent of the total deposit for CRR while 21.5 percent for meeting SLR requirement.

As per the RBI guidelines, there will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks, it said. 

The government had in September cleared the gold monetisation scheme aimed at tapping part of an estimated 20,000 tonnes of idle gold worth about Rs 5,40,000 crore into the banking system.

There is no bar for maximum deposit but the minimum deposit at any one time should be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of 995 fineness, it said.

Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the bank?s designated branch, it said.

With regard to utilisation of mobilised gold, the RBI notification said, the designated banks may sell or lend the gold accepted under the deposit to MMTC for minting India Gold Coins (IGC) and to jewellers, or sell it to other designated banks.

The gold deposited under medium to log term government deposit scheme will be auctioned by MMTC or any other agency authorised by the Central Government and the sale proceeds credited to the Central Government?s account with the Reserve Bank.