Of the 14-odd banks allowed to deal in gold, nine have reportedly approached the RBI to launch the scheme. However, all the 14 banks may not get RBI's permission, sources say.

"We are awaiting clearance and clarifications from the government on some of these issues," said a top RBI source. The scheme guidelines, sources say, are likely to be announced within a week's time.

The stamp duty and octroi need to be scrapped to make the movement of gold free across the country. "If the scheme were to be made investor-friendly, stamp duty must be waived. The state sales tax, octroi and other levies also need to be waived," said a banker.

Under the Indian Stamp Act, 1899, states, except the Jammu and Kashmir, areallowed to levy a stamp duty and prescribe rates that could be levied on instrument executed, which may or may not be tradable, barring certain specified instruments like bills of exchange and promissory notes.

The proposed scheme will attract these levies as gold will have to be transported through different states after it is collected by banks.

This, experts say, will make the scheme costlier for banks to operate, making it unattractive for gold depositors.

The State Bank plans to pay graded interest rates of 3-4 per cent. The tenure of the scheme will be for three to seven years. It will not attract both wealth and capital tax. Interest earned will also be free of income tax.

Under the proposed scheme, a depositor can deposit a minimum of 500 grams of gold (either in jewellery or gold bar form). There is no upper limit. This will then be converted into pure gold (of .999 fineness) refined initially at the small assaying facilities of MMTC, RBI mint and others.

The bank will then issue a depositcertificate of equivalent value, which is expected to be transferable and even tradable on bourses. The depositor can encash the deposited gold at the end of its tenure either in gold or cash/cheque of equal value, the price of which will be determined by the prevailing rate of gold.

It is this deposit certificate that is likely to attract the stamp duty under the Indian Stamp Act.

Officials of the banks planning to launch the scheme say the gold deposit scheme must be considered as any other currency deposit.

Meanwhile, the Bureau of Indian Standards (BIS) is reportedly finalising hallmarking norms for standardised and assayed gold that can be valued by banks after it is deposited by investors. The norms are likely to be announced before the RBI announces gold deposit scheme guidelines.

Insight

Amnesty is must
Though the waiver of stamp duty and tax-free interest sounds attractive, the scheme will have difficulty in succeeding for the simple reason that amnesty has not beengranted. The source of the gold will have to be dislcosed, which will not be possible for most of the prospective participants in the scheme.

The reason for the success of the Gold Bond Scheme of 1993 was the amnesty offered. Yet another problem is that the main reason gold is hoarded is for its liquidity value and the gold certificate will have to demonstrate that it is equally liquid before it becomes attractive.

Urmik Chhaya