Baku, November 5, AZERTAC
Prime Minister of India Narendra Modi will on Thursday launch a programme to lure tons of gold from households into the banking system, but low returns and concerns over tax authorities hounding depositors may hinder a scheme aimed at cutting imports, according to Reuters.
India's obsession with gold is rivalled only by China, with the metal used widely in wedding gifts, religious donations and as an investment. The country has amassed about 20,000 tonnes of gold worth over $800 billion in family lockers and temples.
Previous attempts at mobilising this gold have been unsuccessful, but Prime Minister Narendra Modi is hoping higher interest rates paid will help it to succeed this time.
"The government wants to reduce the reliance on gold imports over time," a finance ministry official said.
Banks will collect gold for up to 15 years to auction them off or lend to jewellers from time to time. They will pay 2.25-2.50 percent interest a year, higher than previous rates of around 1 percent.
But industry experts and bankers said many prospective depositors will not take up the scheme due to concerns that the tax department could question the source of gold, while others may find conventional bank deposit rates of 8 percent more attractive.
"The present scheme will not bring out even 20 tonnes of gold," said Anantha Padmanabhan, southern region head of the All India Gems and Jewellery Trade Federation.
Modi will also launch a sovereign gold bond, offering 2.75 percent interest to domestic investors to cut physical buying.