InvestorQ : The gold monetization scheme appears to be a good scheme. Then why did it not take off in a big way?
Angel dcosta made post

The gold monetization scheme appears to be a good scheme. Then why did it not take off in a big way?

Answer
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Anamika Sodhani answered.
1 year ago


For many years, Indian households had an emotional attachment to gold. Typically gold is bequeathed across generations of women and it is rarely allowed to leave the household. The Gold Monetization Scheme attempted to change this basic approach of Indians to gold. While the scheme had a good intent, it was ambitious in the sense that it overestimated the number of persons who will be interested in the scheme. Against the 22,000 tonnes of gold that Indian households are estimated to be holding, just about 400 grams were collected under the GMS.

Many households privately admit that they find bank funding against gold a much better way of monetizing gold as the form of the gold does not change. The way a bank funding against gold works is something like this. The householder hypothecates the gold physically with the bank. The value of the gold is then assessed by a professional valuer and an overdraft is granted as a percentage of this value. This system suits most households as the gold retains its form and can always be claimed back once the loan is repaid. For the success of the Gold Monetization scheme, there has to be a mind-shift wherein the households are reconciled to surrendering their jewellery and holding it as gold. Also the shortage of assayers and valuers has been a major logistical bottleneck for the success of this scheme.