.......The gold collected by the government should be deposited with the RBI in exchange for rupees. RBI should be willing to do this as it does not amount to monetising the government's borrowing. In RBI's balance sheet on the asset side, gold will go up, which will be offset by an increase in rupee liabilities. Thinking of it in another way, this would be akin to RBI purchasing foreign currency and releasing corresponding rupee liquidity in the market. The transaction between the government and RBI can be reversed when the gold bond matures. An important point to take note of is that the gold price and exchange rate risk is borne by the saver............
Read - ET
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