The shape and appearance of the country’s gold market will change if the Federal Government’s plans to convert gold into equity-equivalent financial assets materialise. This will pave the way for the conversion of the country’s gold reserves into demat form.
In 2015, the Federal Government announced the Gold Monetisation Scheme. The aim was to bring about 25,000 tonnes of gold in the country under this scheme. The value of this gold is about 45 per cent of India’s GDP. This is a scheme of opening deposits and depositing gold in them. Under this scheme, the gold provided by the investor is kept in molten form. The Sovereign Gold Bond Scheme, which offers a fixed percentage interest rate, was also announced with the aim of converting gold into a financial asset.
The shares are issued in demat form to the depositors. The goal is to convert gold into demat in this way. Once the depository accounts are opened and the holding of gold through it is started, gold can be bought and sold through exchanges like stocks.
Investors are currently struggling to sell gold. Gold cannot be sold through banks. There are restrictions on selling gold through jewellers. Jewellers often impose restrictions on the receipt of gold from consumers when prices soar.
Gold can be sold at market price at any time by introducing the method of holding through depository accounts. It can also be turned into gold. For example, suppose you have 500 grams of gold in your depository account. If you want to turn it into jewellery, you can approach a jeweller and buy the equivalent gold rule after transferring the gold to the jeweller’s account. If you want to sell and cash the gold in your account, you can sell it online through Exchange. It is also possible to borrow money by mortgaging the gold in the account. This can also be done online at home.
This would be tantamount to the steps taken by the Central Government to demat the shares. The demat conversion of shares began in 1997. It took 22 years long to complete the process of converting the shares into demat form. Paper shares are not be available from April 1, 2019.
At the same time, turning gold into demat form can be a very complex and lengthy process. Gold bars will have to have a marking number and jewellers will have to affix a UID number. Every trade in gold must be registered. It will take a long time to implement all this.