Confirming the development, SBI chairman MS Verma told The Financial Express: "We are getting ready to open gold accumulation accounts. We have already discussed this with the Reserve Bank and there is no regulatory barrier... It is likely to become operational by the end of this year."

The gold accumulation account will in effect lead to monetisation of the yellow metal. In a sharp departure from the international trend, the State Bank wants to promote gold as a savings product and not an investment vehicle. "Worldwide, gold is being projected as an investment product. We will tap the huge market of rural India by positioning it as a savings product," Verma said.

According to the plan, depositors will be allowed to put in gold or money to run a gold accumulation account. The bank will pay interest in gold and since there will be no lock-in period, there will beprovision for on-the-spot redemption.

"We will run the gold accumulation account on the line of a savings bank account. The interest on gold deposits will be marginally lower at around 3.5 per cent. One can put in money and take away gold -- both in principal as well as interest," Verma said.

The bank plans to recycle the same yellow metal -- which is deposited in the gold accumulation account -- to meet the demand of the gold buyers. "This will cut our gold import. We have been importing bullion from United Bank of Switzerland, Rothschild and some other suppliers in Australia. Once we launch the gold accumulation account, we can sell the same gold across the counter," Verma said.

State Bank has been selling gold on consignment basis for some time now. Last year, the RBI also allowed Canara Bank, Indian Overseas Bank, ABN Amro Bank, Standard Chartered Bank, Bank of India, Allahabad Bank, Bank of Nova Scotia, Corporation Bank, Dena Bank and Bank of Baroda to sell gold to retail customers.

However, thebullion retailing business, which took off with a big bang, has not shown any spectacular growth as the demand for the yellow metal is stagnant following the crash in gold prices.

Besides selling gold across the counter, the State Bank also offers loans against collateral of gold. "In case of gold loans, the yellow metal is used to generate liquidity. The gold accumulation account, on the other hand, will help depositors increase their gold stock without further investment," a senior analyst said.

Commodity market watchers have interpreted the SBI move as a big boost to the rural economy. "Rural households, which traditionally save the yellow metal, will take advantage of this new product as the State Bank with its 8,000-and-odd branch network has a wide reach. It might change the entire face of rural economy," analysts said.

Some of the gold-selling banks are also planning gold loan schemes, gold accumulation plans and gold deposit schemes besides lines of credit against gold. However, none of them hasyet developed any deposit product.

The finance ministry is likely to allow forward trading in bullion shortly by amending the Forward Contracts Act 1952 -- a move which will give a shot in the arm to gold trading.

The RBI has made a formal proposal to the finance ministry to remove the ban on the forward trading of bullion. The gold trading banks have also made a representation to the finance ministry seeking removal of the ban on forward cover on bullion.