RBI panel proposes to set up gold bank

RBI panel proposes to set up gold bank or Bullion Corporation of India, to reduce imports of the metal

·         The idea was mooted over two decades ago by the then Finance Minister Manmohan Singh

·         Such a bank will reduce the gold imports, which are a major worry vis-a-vis the current account deficit, by greater activation of the domestic idle gold

·         The bank's functions will include acting as a 'backstop facility' to offer refinance of gold to institutions lending against the collateral of gold, issuance of gold bonds in lieu of collection of gold stocks, storage and safekeeping facilities for bullions and close coordination with other international bodies such as World Gold Council.

·         Initial capital for setting up the corporation can be contributed by the RBI and select commercial banks, institutions

·         Current account deficit touched a record high of 5.4 per cent in the July-Sept quarter last year

·         Gold imports in the April-December period stood at $38 billion. In 2011-12 fiscal, it was $56.5 billion

·         Concerned over rising gold imports, a RBI committee also suggested limits on imports of gold by banks and other government agencies like MMTC and STC, which account for about 56 per cent of the total import of the precious metal.