Views of Mr. C P Krishnan, Whole time Director, Geofin Comtrade Ltd. on the Gold schemes launched today by the Indian Government.
The recently launched schemes on gold are primarily intended to reduce our reliance on import and manage the widening current account deficit. In the Gold monetization scheme, even though the interest part and tax benefits are the attracting points, overcoming the sentimental approach of the public towards their gold belongings is the key factor that determines the success of the scheme. In case of sovereign bonds, option to invest in demat form possibly attracts large investors. Apart from the conservative rate of return, ease in liquidating the bonds and use as collateral for loan could also generate investor interest. However the banks' point of view, without a proper hedging mechanism, managing the price volatility of gold would cause headache.