"This is the first product to be launched in the gold banking area. Its success will depend on the tenure, interest rate, marketing and other features," World Gold Council (WGC) official Dereck Machado said. However, there is also a little scepticism over the scheme among the industry.A bank official said the scheme would have only limited impact as it would not be able to tap gold kept unlawfully by individuals.

"Unless amnesty is given, this gold cannot be tapped," the official, who did not wish to be identified, said. Machado said the objective of the scheme would be very important for its success.

"Last time, when such an amnesty scheme was announced, 41 tonnes of gold was declared," he said, adding if the purpose of the scheme was tomonetise gold reserves then the outcome would have to be awaited.

In the budget presented in the Lok Sabha on February 27,finance Minister yashwant sinha said under the scheme, selected banks would be permitted to accept gold deposits and issue interest bearing certificates or bonds which could be reclaimed in gold on maturity. The bank official said the scheme does not have any proposal to tap jewellery and therefore, the impact would be minimum.

"The idea, it seems, is to reduce gold imports into the country. That is unlikely to happen," the official said. Machado also said the scheme would not have any impact on gold consumption in India. "The consumption is basically for festivals, marriages and other functions. That will continue," he said.

All India Bullion Traders Association president Sheelchand Jain said no conclusion could be made right away before the policy was announced. Delhi Gold Association president Rakesh Saraf said the scheme might be able to attract only a small quantity ofgold.

"People might start gold disinvestment in a small way due to shortage of liquidity. But it will not have any effect on gold consumption in the country," he said. The scheme is expected to free depositors from the problem of storage, movement and security for the gold in their possession and also provide a regular source of income.

Sinha said the country would benefit by re-cycling the idle gold, reducing dependence on imported gold. Interest from the scheme would be exempted from income tax, while the value of assets deposited would also be not taken into account for wealth tax. Also any capital gains made on these bonds through trading or at redemption would be exempt from capital gains tax. However, no amnesty would be extended through the scheme.