According to sources in the banking sector, the retail market for gold is expected to pick up in the near future largely on account of the fall in domestic prices of the metal by 1-2 per cent recently following Britain's plans to slash its gold reserves. International prices of gold have come down by over 5 per cent since the plan was announced.

While admitting that the import of the metal would witness a drop in the coming weeks owing to reduction in seasonal demand with the marriage season coming to an end, bank sources said they did not forsee any major fall in import of the precious metal in the long term. "India is the largest importer of gold and the metal has immensesentimental value and people still consider it to be a wise investment and this belief is unlikely to be shaken despite any upheavel in the international market," the source said.

And it is largely on this account that several banks feel that the Government's gold deposit scheme is likely to prove a non-starter. It is believed that the consortium of banks which have been identified for implementing the scheme, led by the State Bank of India, have already submitted their proposal to the Reserve Bank of India and are awaiting a formal nod from the apex bank.

However, a cross section of those in the banking sector here feel the scheme may not attract the 150 to 200 tonnes of gold idling in lockers since it would be very difficult to convince ladies to part with their personal jewellery. Moreover, it is being felt that most people would be unwilling to forfeit the labour charges they have incurred while purchasing jewellery. "The cost of jewellery is almost 30-40 per cent higher than the actual cost gold onaccount of labour charges and while the envisaged gold deposit scheme would give a good rate of interest for gold and that too tax free and also enable people to redeem gold after three years, there would be a substantial loss of labour charges in such schemes which may make people reluctant to part with their jewellery," observed a senior bank executive.

Another perceived stumbling block to the scheme is that the government has no means of acsertaining the amount of gold held in the form of biscuits. According to rough estimates, as much as 25 per cent of the gold in the country is held in biscuit form.

On the flip side, however, it is expected that the scheme would provide investors with the advantage of dollar-related investments since the price of gold is directly affected by the international fluctuations in the price of the dollar. Not only that, it is also expected to reduce smuggling, bring down forex outgo on imports as well as provide consumers with gold of assured purity at competitive prices.