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RBI issues guidelines on gold monetization scheme

The Reserve Bank of India has issued guidelines for the Gold Monetization Scheme allowing banks to fix their own interest rates on gold deposits. Prime minister Narendra Modi is expected to launch the scheme on 5 November aimed at mobilising gold that is lying idle with households and institutions. It is estimated that nearly 20,000 tonnes of the precious metal are now in the custody of families institutions in the country. The guidelines provide for banks to set interest rate on gold deposits with principal and interest of the deposit denominated in gold. The guidelines said redemption of principal and interest at maturity will, at the option of the depositor be either in Indian Rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. The option in this regard shall be made in writing by the depositor at the time of making the deposit and shall be irrevocable. The interest will be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit, it said. The guidelines also said the designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes. While the former will be accepted by banks on their own account, the latter will be on behalf of the government of India. The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). The stock of gold mobilized under the scheme by banks will count towards the general SLR requirement. There will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks.

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