 "Government drops plan to use gold deposits as part of CRR, SLR")
The government has dropped plans to utilise gold mobilised under the proposed monetisation scheme for meeting the mandatory liquidity requirements for banks, as it wants to avoid another confrontation with the Reserve Bank of India (RBI).
The government dropped the plan to use gold deposits as part of cash reserve ratio (CRR), statutory liquidity ratio (SLR) in the scheme because of opposition from RBI, sources said.
The scheme is expected to be launched by the first week of September and Cabinet approval is expected in a couple of weeks, sources said.
“RBI had argued against using gold deposits as CRR and said the move will weaken CRR as a monetary policy tool. The government does not want to open too many fronts with RBI,” the sources said.
Among others, the government and RBI had differed on issues related to the proposed monetary policy committee for setting interest rates, although the differences are believe to have sorted.
CRR is the portion of total deposits to be kept with RBI in cash, while SLR is the portion of deposits compulsorily parked in government securities.
“To incentivise banks, it is proposed they be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” the draft guidelines on the gold monetisation scheme, issued in May, had said.
CRR is at four per cent while SLR is at 21.5 per cent. Therefore, 25.5 per cent of the cash deposit mobilised by banks are locked in these two statutory ratios.
If gold mobilised through the scheme is allowed to meet CRR/SLR requirements, the value of the metal would be considered as deposits for meeting the reserve ratios.
The government dropped the plan to use gold deposits as part of cash reserve ratio (CRR), statutory liquidity ratio (SLR) in the scheme because of opposition from RBI, sources said.
The scheme is expected to be launched by the first week of September and Cabinet approval is expected in a couple of weeks, sources said.
“RBI had argued against using gold deposits as CRR and said the move will weaken CRR as a monetary policy tool. The government does not want to open too many fronts with RBI,” the sources said.
Among others, the government and RBI had differed on issues related to the proposed monetary policy committee for setting interest rates, although the differences are believe to have sorted.
CRR is the portion of total deposits to be kept with RBI in cash, while SLR is the portion of deposits compulsorily parked in government securities.
“To incentivise banks, it is proposed they be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination,” the draft guidelines on the gold monetisation scheme, issued in May, had said.
CRR is at four per cent while SLR is at 21.5 per cent. Therefore, 25.5 per cent of the cash deposit mobilised by banks are locked in these two statutory ratios.
If gold mobilised through the scheme is allowed to meet CRR/SLR requirements, the value of the metal would be considered as deposits for meeting the reserve ratios.