Mr. Chidambaram, you said on 6th June, 2013 at the 66th Annual General Meeting of the Indian Banks' Association "When there was a sharp drop in gold prices, millions were happy. I'm afraid I was not among the millions. I told the (RBI) Governor that the drop in the gold prices internationally is bad news for India"(Business Line dated 7-6-13). As part of your fight against millions you have also raised import duty on gold from 6% to 8% now even though it was raised three times recently. It clearly shows that you are not on right path Mr. Finance Minister.
We, the common man of India was in dismay as the price of gold shoot up and unabale to purchase minimum quantity for marriage and other domestic purposes. So, this is an opportunity to purchase some gold and keep it for future requirements. But, sorry to say that you don't understand the feelings of common man. The solutions for your problems as a finance minister is something else .
On November 22, 2011 here it was said
"As Rupee falls below 52 against dollar RBI intervention is required to save Rupee.RBI can utilise the gold procured in 2009 to avoid purchase of gold from out side for three months and save foreign currency now. Further, as the gold was procured for a low price at that time the profit generated can be utilised for reducing the deficit.
The second option is to create a gold ETF utilising the above gold and issue it to public redeemable against their purchase of gold jewellery from jewelers. RBI can release gold to jewelers by accepting gold ETF. That also will avoid import of gold for at least three months. The advantage is RBI need not release all the gold now."
That suggestion was given in 2011. Currently as all major banks are under core banking you can introduce Adhar linked "Gold Savings Bank Account" in State Bank of India and some other notified banks for maintaining gold (in demat form)procured by common man for the purpose of investment. It is reported that more than 40 percent of gold purchased is for investment purpose. The gold must be purchased from the same bank using the funds available in the clients Savings Bank Account. The gold(in grams)kept in the "Gold Savings Bank(GSB)" account may be allowed to redeem when real requirement comes (to be restricted four times in a year) either by credit to the Savings Bank Account or issue of gold coins. Thus the common man's purose will be served without any real import of gold now. Other details can be fixed in consultaion with Rserve Bank of India, State Bank of India and other interested parties. It may also be considered whether the gold available with the public in India can be attracted to be deposited in GSB.
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"In this context, the policy makers can explore the possibility of setting up an apex body -The Gold Bank - which can procure and retain gold abroad through offshore foreign currency borrowing.
Using this gold backing , the scheduled commercial banks can offer a Gold Deposit Account to retail customers, which can represent notional units of gold and provide gold price return in weight terms. This will not only promote financialisation of incremental demand for gold, but also incentivise the deferment of the need for importing physical gold."
Rana Kapoor, MD&CEO, Yes Bank. (Page 6, Business Line dated 12th October, 2013)
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