Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ron Everest who wrote (33146)	5/4/1999 8:58:00 PM
From: Alex	Read Replies (1) \| Respond to of 116804

State Bank eyes temple gold for bond scheme Jayanthi Iyengar New Delhi 2 May Sceptics beware. The gold bond scheme, hitherto dismissed as an unviable proposition, has acquired all the hallmarks of a runaway success. For starters, the gold held by the Turupati Tirumalai Devasthanam may well find its way into the gold bond scheme. So also that of other rich temples like Nathdwara, Meenakshi and Guruvayoor. This is because the State Bank of India (SBI) is considering targeting temple gold under the proposed gold bond scheme, the final touches to which are currently being given in concurrence with the Reserve Bank of India (RBI). The rich Marwari community, too, would be part of its target audience and, perhaps at a later date, government gold. Government gold is confiscated gold (distinct from the gold reserves of the government) lying idle in the RBI's coffers. It was this gold which was pledged in 1991 when the country was faced with a balance of payments crisis. This gold is estimated to be in the range of 50 metric tonnes. Some amount of VDIS gold is also expected to flow into the scheme. With the passage of the budget, the SBI in now finalising the scheme for announcement. In internal meetings, the SBI has reassured finance minister Yashwant Sinha that it will be able to raise a minimum of Rs 5,000 crore. The SBI is tying up with Swiss banks to exchange the gold deposited with it under for hallmarked gold, which could be then lent to jewellers. For this it has sought permission from the revenue department and the commerce ministry to maket the gold should be duty free, failing which the SBI would end up paying import duty on it. The SBI has also sought the apex bank's permission to sell part of the gold thus raised abroad, though the RBI is disinclined to extend this facility to the SBI in the initial stages of the scheme. The SBI may,, however, be permitted to sell part of the gold raised abroad and invest it in other instruments at a later date. Targeting temple gold changes the whole complexion of the scheme and its potential for success. Till now sceptics had dismissed the success of the scheme as the budget announcements made it clear that it does not carry an amnesty. This means that gold acquired through black money cannot be deposited under the scheme, earnings from which are exempt from capital gains and other related taxes. Sceptics had been arguing that the scheme would not be popular with individuals for several reasons. Jewellery generally has sentimental value attached to it, which means many depositors would not be interested, since the scheme, by definition, only provides for return of gold of equal value on the redemption of the bond and not the same jewellery. Also, there is the issue of who would bear the making charges on the jewellery since at times, the making charges could be as high as 30 per cent of the cost of jewellery itself. Since there are indications that the scheme would carry an interest of about 2.5 per cent to 3.5 per cent, it has been argued that it would be unattractive to individuals who would lose out on the making charge. While all these arguments are valid in case of individuals, they would become non-issues if temple gold finds its way into the SBI vaults. Sentimental value is not attached to offerings, nor is making charge an issue for the temple trusts. Recirculating gold locked up in temple vaults would check gold imports, which were at an all-time high during 1998-99. The broad aim of the scheme is to bring idle gold into circulation and check the unusually high gold imports, which many experts consider to be unproductive imports. economictimes.com