MONETIZE IDLE GOLD, FOR GREATER LIQUIDITY

“GOLD GETS DUG OUT OF THE GROUND IN AFRICA. THEN WE MELT IT DOWN, DIG ANOTHER HOLE, BURY IT AGAIN AND PAY PEOPLE TO

STAND AROUND GUARDING IT. IT HAS NO UTILITY. ANYONE WATCHING FROM MARS WOULD BE SCRATCHING THEIR HEAD!"

- WARREN BUFFET

TERMS:

MONETIZE- CONVERT INTO CURRENCY

IDLE- WHICH IS NOT IN USE

LIQUIDITY- AVAILABILITY OF LIQUID ASSETS AND CASH

• Amid rising gold imports, the industry has sought a National Gold Policy in order to set up gold exchange and channelize the yellow metal lying idle with households to financial products.

• 22000 tonnes is the estimated quantity of gold lying idle with households, according to a report by FICCI and World Gold Council.

• 895 tonnes is the average annual gold consumption over the past 5 years.

RECOMMENDATIONS:

• Encouraging households to monetize their gold stocks

• A strong infrastructure

• Standardization of price and quality

OBSTACLES:• Paucity of banks offering gold deposit scheme

• Size of required deposit

• Way in which customers are repaid

• Timely valuations

• With the continuous demand for gold, smuggling had increased due to which government removed restrictions on gold imports.

• Arun Jaitely said “If you put too many restrictions, then the official gold import will come down and unofficial imports will go up.”

POLICY PRESCRIPTIONS

• Establish a Gold Board for managing import-export

• A spot exchange to offer uniform prices

• Develop accredited refineries

• Incentivizing banks

• Introducing compulsory quality certification

• Revitalize gold-deposit scheme

• Encourage gold-backed investment products

• Introduce gold-backed pensions & insurance products