Reserve Bank of India has issued guidelines for the Gold Monetisation Scheme that allow banks to fix their own interest rates on gold deposits. The RBI notification in this regard comes ahead of the formal launch of the scheme by Prime Minister Narendra Modi on Novermber 5.

The gold deposit scheme is aimed at mobilising a part of an estimated 20,000 tonnes of idle precious metal with households and institutions. As per the guidelines, banks will be free to set interest rate on such deposit, and principal and interest of the deposit will be denominated in gold. The interest will be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit.

The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes.  The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). The CRR is the portion of the total deposits, which has to be kept with RBI in cash, while SLR is the portion of deposit compulsorily parked in government securities.

The government had in September cleared the gold monetisation scheme aimed at tapping part of an estimated 20,000 tonnes of idle gold worth about Rs 5,40,000 crore into the banking system. There is no bar for maximum deposit but the minimum deposit at any one time should be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of 995 fineness.