It came up with the clarification in the wake of media reports to the contrary.
“Some sections of the media have reported that Government will directly intervene to monetize the gold held by charitable, religious and other institutions. It is clarified that this is complete misinformation,” it said.
A large chunk of India’s ‘idle’ gold is held by religious institutions. The Sree Pathmanabhaswami temple in Trivandrum, for example, holds gold worth around $20 bln.
The Tirumala Tirupati Devasthanam has been reported to have over 5,000 kg of gold deposited with banks. The religious trust gets interest in the form of gold in return for its investment of gold. However, only a small portion of the total wealth held by the institution is estimated to be so deposited.
The current government at the center has been keen to convert ‘idle’ gold held with individuals and institutions into capital by offering to pay interest in the form of cash or gold in case gold is deposited in a bank.
“The objective of the Scheme is to monetize the idle gold held within the country and promote financial savings. A good part of the monetized gold will also be made available to meet the domestic requirement of gold. This will help in reducing our gold imports and save foreign exchange and deal with the problem of Current Account Deficit,” the government said.
Under the new gold monetization scheme, the government has notified to offer a rate of 2.25 percent on medium-term deposits (5-7 years) and 2.5 per cent on long-term deposit (12-15 years).
While the interest is lower than what you get on rupee deposits (7%), it should be noted that gold typically does not lose value on account of inflation of supply.
In other words, even though you get 107 rupees for an investment of Rs 100 after a year, the prices of items that you can purchase with the money would also go up in that one year. As a result, your ‘real return’ will be around 2-3% only — which is what the gold monetization scheme offers.
The gold monetization scheme also offers a lower minimum quantity. You can deposit just 30 grams compared to half a kg required in earlier schemes (which also offered lower returns of only around 1%).