The central bank has also specified that banks may not be allowed to hedge their price risk in the international market. At a high-level meeting held on Wednesday, which was convened by MS Verma, advisor to RBI and the external investment and operations department chief general manager Shyamala Gopinath. The meeting was attended by Bank of Baroda chairman and managing director K Kannan, Bank of India CMD S Rajgopalan, and representatives from ABN Amro Bank, Nova Scotia, Corporation Bank, Indian Overseas Bank and others.

According to Gopinath, the meeting was called for framing broad guidelines for the scheme and progress made by banks on the scheme. "Banks have not yet submitted theirscheme to the central bank for approval. Thus, the discussion was confined to the framing of guidelines for launching the scheme," she said.

Officials, who attended the meet, said the nominated banks are keen to launch the scheme in the form of gold bonds with a varying maturity period between three and seven years. The banks have suggested 500 gram of gold as the minimum quantity which will be accepted under the scheme. The central bank is also considering registering the bonds with the Security and Exchange Board of India and listing it with various stock exchanges. "The scheme is illiquid and will not cater to small investors," sources said.The plan is likely to have a put and call option, and the bands and interest-bearing certificates issued by various bonds will be traded in the market. The meeting also discussed issues pertaining to refinery and assaying facility. According to bankers, through the gold-mobilisation scheme, the RBI wants to tap at least a part of the country's 12,000-tonnes idlegold reserve. The primary objective for launching such derivate products is to put the huge reserve to productive use and reduce gold imports, and save valuable foreign exchange.

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