RBI Panel Mulls Alternatives to Gold Investments
PUNE, India--A working group at India's central bank is looking at alternatives to physical gold ownership or derivatives that require financial institutions to back up certificates with 100% underlying gold, a deputy governor at the bank said Sunday.
Indians have traditionally been huge buyers of physical gold, mainly for jewelry, and the country has historically been the world's top importer of the metal. The working group's objectives include reducing reliance on imports--a major reason for India's gaping current account deficit--Reserve Bank of India Deputy Governor Subir Gokarn said.
The central bank panel is looking at offering annuities to pensioners against an individual's owned gold, Mr. Gokarn said at a banking conference in the western Indian city of Pune.
Another possibility would be allowing financial institutions to issue gold certificates with the underlying metal being kept abroad, Mr. Gokarn said, adding that the issuers wouldn't necessarily have to hold 100% of the gold represented by the certificates.
India's current account deficit, as a proportion of gross domestic product, was 3.9% in the April-June period, outside the RBI's comfort zone of 2%-3%.
Last week, Reserve Bank of India banned banks from issuing loans for gold purchases. Banks can't make loans for the purchase of physical gold such as jewelry, coins and bars, or units of gold exchange-traded funds and gold mutual funds.
The federal government in March doubled the import duty on gold to 4%.