The Reserve Bank of India called a meeting of senior bankers to take stock of the situation recently. RBI's special advisor, M S Verma, and chief general manager (department of external investments and operations), Shyamala Gopinath, attended the meeting. The meeting discussed the hurdles in the way of the launch of gold deposit schemes by banks.

Some of the banks have already started offering gold loans to the jewellery exporters following the RBI directive issued recently. However, floating the gold deposit scheme may not be that easy as banks need to first put in place proper infrastructure for accepting gold.

For instance, banks need to put up an assaying facility to judge the purity of the yellow metal.Yet another hurdle faced is that there are not many bullion refineries in the country.

The primary objective before the finance ministry, it seems, is to put the huge gold reserves of the country to productive use and reduce gold imports, thereby saving foreign exchange. Over the last several years, the internal price of gold has come down from $ 400 per ounce in 1985 to about $ 285 per ounce now. This clearly goes to prove the government lack of vision in identifying the golden goose in backyard.

Going by rough estimates, 100 tonne of gold is worth Rs 4,300 crore. Even if the government monetise about 300 tonne of gold of the total reserve of 12,000 tonne, over Rs 13,000 crore will come into the system which will boost the infrastructure financing.

India accounts for roughly 8 per cent of the world gold reserves. The Reserve Bank of India's gold stock is to the tune of 400 tonnes. The RBI has floated four gold bond schemes, the last one hitting the market in 1993, which mopped up only 43 tonne of goldfrom 37,000 investors. With the entry of commercial banks the scene is likely to hot-up.

"During the fiscal 1998-99, the total gold imports into the country are likely to be at a record 700 tonnes. In monetary terms, that works out to $ 7 billion. To that extent, it has put pressure on the country's forex reserves," said an official of a bank. However, it has been neutralised by large inward remittances by non-resident Indians as the government has been able to virtually wipe out the hawala market by putting the yellow metal on open general licence (OGL).

In the first quarter of the current fiscal, about 450 tonne of gold worth $ 4.5 billion has come into the country. Bankers are, however, skeptical about an early launch of the gold deposit schemes as they do not have proper infrastructure to process the gold into small equal denominations.

Another controversial issue is the reserve requirements on gold. "Gold deposit schemes may not take off unless the issue relating to SLR and CRR is sorted out. Thereserve requirements increase banks' lending cost of metal while government enterprises like MMTC and STC are not subject to such requirements," argued an official from a nationalised bank.