Modi launches gold monetisation scheme

Dubai: Indian Prime Minister Narendra Modi has launched a gold monetisation scheme, according to reports from Indian media on Thursday.

The scheme is aimed at luring tonnes of gold from households into the banking system.

It involves unlocking an estimated 20,000 tonnes of the precious metal in households and temples, estimated to be worth $800 billion, according to reports.

Under the scheme, banks will reportedly collect gold for up to 15 years and pay 2.25-2.50 per cent interest per year.

It's not the first time, however, that this kind of scheme had been launched.

In the first two, the campaigns had failed because of the reluctance of many Indians to give up their gold due to the emotional connection they have towards jewellery, especially inherited pieces.

Modi launched three gold-related schemes, including a coin engraved with the images of national emblem Ashok Chakra and Mahatma Gandhi on its two sides, in a bid to put some 20,000 tonnes of idle gold into productive use.

The other two schemes launched are the gold monetisation scheme to convert jewellery and other yellow metal assets with people into interest-bearing deposits, and the sovereign bond scheme with an eight-year tenure, while allowing an exit option after five years.

According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India.

The annual imports amount to around 850-1,000 tonnes valued at $35-$45 billion.