Speaking to CNBC-TV18, SBI Chairman Pratip Chaudhuri said his bank has two tonne of gold lying in the gold deposit scheme but is unable to profitably lend it out.
Imagine having two tonnes of gold but very little profit from it! Strange as it may sound, that is the story of State Bank of India's gold deposit scheme. Speaking to CNBC-TV18, SBI Chairman Pratip Chaudhuri said his bank has two tonne of gold lying in the gold deposit scheme but is unable to profitably lend it out.
Recently the government allowed gold exchange traded funds (ETFs) to deposit part of their gold holdings with banks in an effort to manage demand of imported gold. The initiative is one of several announced last week with the goal of minimising gold's impact on India's big current-account deficit.
But Chaudhuri is not too hopeful of the gold ETF being dumped or placed with the PSU major. "I do not understand the logic or rational of giving a tax rate of 10 percent on gold ETF. If today on bank deposit interest, the tax rate is 30 percent, then what is the justification of having a tax rate of 10 percent on gold ETF?," he asks.
Having done that, he says, the government should not complain that people are putting money in gold ETF. He says if the authorities want to promote a market, they want people to bring back their gold to us, there should be an opportunity to do so.
"Now, today if a customer buys gold from the bank, there is no way he or she can return the gold to the bank in case they don't feel like holding their savings in gold. Therefore, a two-way opportunity is very necessary and it is so there in shares, securities and foreign currency. The buy and sell option is very much necessary no matter what is the commodity or product being traded," he told the channel. (Catch the full interview)
The government also hiked the gold import tax to 6 per cent from 4 per cent and eased the terms of gold deposit schemes of banks to encourage individuals to deposit idle gold.
India's current-account deficit rose to 5.4 percent in the third quarter, partly fuelled by high gold imports.
"The advantage will be that a part of the gold lying in stock will be brought into circulation and will partially meet the requirements of the gems and jewellery trade," Finance Ministry secretary Arvind Mayaram told reporters after the announcement. "It is hoped that, consequently, there will be a moderation in the quantity of gold that is imported into the country."