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The move follows the finance ministry’s decision to link gold exchange-traded funds with gold deposit scheme and relaxation by the Reserve Bank of India of certain provisions in such schemes.
Sebi has said the total investment in GDS will only be up to 20 per cent of the total assets under management (AUM) of gold ETF schemes. As on December 2012, the AUM of gold ETFs was nearly Rs 12,000 crore. According to estimates, AMCs own 40-45 tonnes of gold under these schemes. They will be able to garner about Rs 2,400 crore by depositing a fifth of this gold with banks.
“The incremental returns that AMCs get by depositing gold with banks will go into the scheme, which will add to the performance,” said Lakshmi Iyer, senior vice-president and head, fixed income, Kotak Mutual Fund. GDS fetches between one and three per cent annually.
Sebi has said the gold certificates issued by banks in respect of investments by gold exchange-traded funds in gold deposit scheme should be held by mutual funds only in dematerialised form.
Further, Mutual funds will have to put in place a written policy on investment in GDS, with due approval from the board of the allowed asset management companies and the trustees, said a Sebi circular.
Banks lend the gold deposited by asset management companies to jewellery manufactures.
Assuming asset management companies deposit 20 per cent of the 40 tonnes of gold they own, it will reduce gold imports by eight tonnes. Rising gold imports have been a major concern for the government, as it widens the current account deficit (CAD). The CAD had touched a record high of 5.4 per cent of gross domestic product in the July-September 2012 quarter. Gold imports between April and December 2012 was $38 billion. India imported gold worth $56.5 billion in 2011-12.
