.........The RBI study, therefore, sensibly advises increased monetisation of gold — to make unaccounted gold generate accounted money. It suggests setting up a bullion corporation for lending against and refinancing gold, and pool and trade in gold stocks. The study commends encouraging gold loans by banks and non-banking institutions. This is what traditional pawnbrokers have been doing for ages. The State began curbing, instead of registering and disciplining, private moneylenders. The hope that banks would replace them has been belied.........
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1 comment:
As always, Gurumurthy’s analysis is argument-proof. But, a second reading of the article leaves one with a feeling that when it came to gold, the strong mind has succumbed to sentiments. While there is a strong case for pragmatic management of capital imports which has dented current account with $339 billion, the contribution of gold at $161 billion to CAD is no mean figure. If India has a domestic gold stock of 20,000 tonnes, there is a need to bring a small portion of it into productive use. It is in this context some moves are on the way for better management of gold in India. The RBI initiative to study the issues relating to gold imports and gold loans has to be seen in this perspective. The country cannot allow perceptions like ‘fear of smuggling’ to impact policies for regulating financial sector.
Gold which no doubt is the villain in the Indian economy can be reformed into a saviour, if there is a political will to seriously go ahead with the following initiatives(the list is illustrative) which have already seen some beginning during the last one year:
• Make a realistic estimate of surface gold stock in India. Individuals and institutions holding gold stock above a threshold level should report the quantum of gold held to a designated authority.
• Insist on standardisation of a reasonable portion of gold held by institutions. Infrastructure for such standardisation should precede.
• Encourage financial institutions to increase their gold portfolio. Organisations including religious institutions should be provided incentives to deposit gold with banks.
• Establish a National Registry to keep track of inflow, stock and outflow of gold in various forms.
• Encourage introduction of gold-backed investment instruments.
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