SBI chairman GG Vaidya said the bank would launch the scheme over the next three months after it sets up the in-house assaying and refining facility. "We are talking to Credit Suisse First Boston and Rothschild for a strategic alliance," he said.

According to sources, SBI is willingto hold a majority stake in the joint venture in case some banks opt out from the proposed venture. Setting up of the refinery will pave the way for smooth trading of gold derivative products like a deposit mobilisation scheme.The proposal for setting up a refinery was put forth before the RBI at a high-level meeting last month by banks.

The proposed entity will facilitate assaying to determine the purity of gold approved by BIS, hallmark jewellery and perform the function of a refinery. According to the proposal, the member banks will have their representatives on the board of the new entity which will help the financial derivative product take off smoothly. The WGC will function as a facilitating agency for smooth gold trading at the retail level.

The hallmark on gold will be similar to an ISI mark stamped on industrial products. The BIS Act of 1986 will be amended and certification of purity of gold will be in accordance with global standards.

According to a bank official, through the gold loanscheme and the deposit mobilisation scheme, the central bank would like to tap at least a part of the country's 12,000-tonne idle gold reserves.

Floating the gold deposit scheme will not be an easy task as banks need to first put in place proper infrastructure for accepting gold, senior bankers said. "At present, there are not many Government-approved refineries. The Government of India Mint will not be able to handle the pressure generated after the launch of the schemes," sources said.The primary objective of launching such derivate products is to put the huge gold reserves of the country to productive use and reduce gold imports and save the country's foreign exchange.

The launch of a tax-free gold deposit scheme was announced by finance minister Yashwant Sinha during his second budget presentation last week.Under this scheme, the interest on the gold deposit bonds will be exempted from income tax and the value of assets deposited in the gold deposit scheme from wealth tax. The gains through trading ofbond and redemption would be exempt from capital gains tax.

However, bankers are a disappointed lot as amnesty is not provided to the gold deposit scheme. "Investors will not rush to subscribe to the gold deposit scheme as it does not provide immunity against inquiry or prosecution. "As we are targeting the unaccounted and unauthorised gold locked in the private vault of individuals also through this scheme, it will not attract the deposit holder," said senior bankers. A gold bond scheme, launched in 1993 and redeemed in 1997, was able to mop up 41 tonne of gold lying in the household sector.