The RBI can learn a trick or two from Turkey in order to absorb gold into the financial system, thereby turning it into a productive asset
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Friday, July 6, 2012
Managing gold, a policy challenge - K Kanagasabapathy
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As the country is having a handsome domestic stock of over 18,000 tonnes (according to World Gold Council estimates, which must be conservative) at least a sizeable portion of which could be made available for domestic commercial use, given the will to manage the stock with appropriate incentives and disincentives, GOI should think in terms of reforms in gold management policy. The suggestions in the article should be seen in this context.
It is sad that there is no perceivable effort from the government’s side to discourage further accumulation of ‘ornament gold’ in households which is partly responsible for financial loss to middle class families in India and to some extent, dowry-related issues and security problems.
Last year the Tirumala Tirupati Devasthanams (TTD) deposited 1000 kg of gold with State Bank of India. These deposits earn a small interest also. This is a healthy move and is expected to trigger similar moves by other temples, institutions and may be, private individuals/families.
RBI also should, at this stage, seriously consider realignment of its portfolios especially under forex reserves, increasing gold holdings.
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