Government Drops Plan to Use Gold Deposits as Part of CRR, SLR: Report

Aug 11, 2015: The government was planning to use gold deposits to meet the necessary liquidity requirements for banks, but now it has canceled this plan. To Avoid conflicts with Reserve Bank of India, the government was supposed to use the gold deposits.

According to the sources, the plan to utilize gold as part of CRR, SLR in Gold Monetization Scheme has been dropped because of the opposition offered by RBI.

The Gold Monetization Scheme is likely to be unveiled in the first week of September. The cabinet approval is also expected to be come out in the upcoming weeks.


Gold Monetizing Scheme


"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," sources said.

The Cash Reserve Ratio is the deposit ratio that is to be kept with RBI in terms of cash. The current CRR is 4%. Statutory Liquidity Ratio (SLR) is counted in terms of liquid assets and liabilities that must be kept with the government to maintain the flow of money in the market. The current SLR is 21.5%.

"To incentivize banks, it is proposed that they may be permitted to deposit the mobilized gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination," the draft guidelines on Gold Monetization Scheme issued in May had said.