Deconstructing the yellow metal’s sheen
Why does RBI want gold holding in demat form?
In order to reduce the quantum of physical holdings in the country, the deputy governor of the Reserve Bank of India, Subir Gokarn, has proposed the idea of holding the metal in demat format like any other financial product. At the recently-held annual Bancon in Pune, the deputy governor said that the central bank is considering alternative channels for investment like a modified gold-backed scheme, gold-linked accounts, gold accumulation plans and gold pension plans. These schemes, if implemented, would discourage physical investment in gold. He also said that a working group headed by KUB Rao of RBI will shortly be coming out with its report on the ways to deal with the problem arising from high gold imports on the balance of payments.
How would RBI’s proposed gold-backed instruments work?
Though the details of the gold-backed instruments will come out in the RBI report, according to Subir Gokarn, the gold accumulation plan will be similar to the systematic investment plans of mutual funds, in which the plan will buy a small quantity of gold at regular interval without any physical delivery. The gold-linked accounts could be non-interest bearing accounts, where the gold would be purchased and hedged abroad and give an account
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