Announcing the scheme, finance minister Yashwant Sinha said that selected banks would be permitted to accept gold deposits, which on maturity, could be reclaimed in gold. This would free depositors from the problems of storage, movement and security for the gold in their possession while providing them with a regular source of income.

To encourage recycling of gold and to reduce dependence on imports, Sinha said that it was proposed to exempt the interest on the old deposit bonds/certificates from income tax and the value of assets deposited in the gold deposit scheme from wealth tax.

Furthermore, any capital gains made on these gold bonds/certificates through trading or at redemption would be exemptfrom capital gains tax.

The finance minister, however, clarified that the scheme would not enjoy amnesty.

He urged the state governments to consider exempting movement of gold covered under the scheme from octroi, sales tax, stamp duty and similar levies.

Earlier, Sinha noted that the huge amount of gold held by charitable and religious institutions were idle assets earning no income for the holders, who often incurred costs to ensure security.

Calling this an `anomalous' situation, the finance minister noted that the country spent thousands of crore worth of foreign exchange each year to meet fresh demand for gold holding.

The rising gold imports have been adding to the domestic stockholding. This apart, gold imports at the end of the current fiscal (1998-99) are estimated at about 800 tonnes.