“To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” a draft guidelines on Gold Monetisation Scheme had stated.
RBI officials have reportedly written to the Finance Ministry opposing the latter’s suggestion to use gold deposits as bank CRR. RBI feels that banks may hoard excess gold if it is included in CRR and also highlighted that existing rules do not permit usage of gold as bank CRR.
The central bank is of the view that use of gold as CRR will weaken its effectiveness as monetary policy tool and may expose RBI's reserves to risks arising from commodity price fluctuations.
Earlier, the government was considering allowing banks to utilise gold mobilised under the monetisation scheme for meeting mandatory liquidity requirements set by the Reserve Bank of India (RBI).
“To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” a draft guidelines on Gold Monetisation Scheme had stated.
The Finance Ministry has sought comments from stakeholders on the draft gold monetisation scheme by June 2.
According to a report published early this year, RBI logic was that the proposal to use gold as CRR is counter intuitive. “In case of capital inflows, the banks may be asked to keep forex and gold as CRR. Assuming constant inflows, the value of rupee against dollar is likely to rise. Hence, the value of stock of forex and gold kept as CRR, will diminish with rising rupee,” the report had stated quoting sources.
The central bank is of the view that use of gold as CRR will weaken its effectiveness as monetary policy tool and may expose RBI's reserves to risks arising from commodity price fluctuations.
Earlier, the government was considering allowing banks to utilise gold mobilised under the monetisation scheme for meeting mandatory liquidity requirements set by the Reserve Bank of India (RBI).
“To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” a draft guidelines on Gold Monetisation Scheme had stated.
The Finance Ministry has sought comments from stakeholders on the draft gold monetisation scheme by June 2.
According to a report published early this year, RBI logic was that the proposal to use gold as CRR is counter intuitive. “In case of capital inflows, the banks may be asked to keep forex and gold as CRR. Assuming constant inflows, the value of rupee against dollar is likely to rise. Hence, the value of stock of forex and gold kept as CRR, will diminish with rising rupee,” the report had stated quoting sources.
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