To keep gold prices under check, the practice of giving gold as dowry or as an offering at religious places must be reduced, said Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India.
“Gold has no intrinsic value and yet the demand for it keeps rising. We must remember that offering gold as dowry or to God must be reduced. Indians must offer 2 karat gold instead of 24 karat for religious purposes,” Dr Chakrabarty said at a regional banking summit.
Emphasising the need for a social revolution in India, the Deputy Governor said “the culture of wearing gold ornaments was when we were a rich country but now that we are poor, we cannot continue the same.” He observed that the yellow metal cannot fetch returns without selling it. Usually, selling gold is the last resort for Indians.
Gold prices worldwide will come down if India and China stop buying gold, said the Deputy Governor.
India’s imports mainly consist of oil and gold, both of which are used for consumption or unproductive purposes, he added.
SUBSIDIES
“Subsidy for the rich in society is wastage while that for the poor is a leakage,” Dr Chakrabarty said.
Subsidy for the poor is important, however, as they are not getting the actual subsidies.
“In principle, the rich should subsidise the poor but in the financial markets the poor are subsidising the rich….for instance, why do the rich need a subsidy on LPG,” he asked.
Dr Chakrabarty said that there was nothing wrong in asking large foreign banks to meet the 40 per cent priority sector lending targets.
He said if the banks have a large branch network, then they should adhere to the priority sector lending norms.
“They should participate in the development process of this country, if they want to think big…otherwise they can limit their size to under 20 branches.”
Revised norms
The RBI on Friday revised the priority sector lending guidelines.
One of the key suggestions was to bring foreign banks with more than 20 branches in the country under the priority sector lending net on par with domestic banks.
Domestic banks have to set aside 40 per cent of their total lending for priority sector such as agriculture, micro, small and medium scale enterprises among other sectors.
Under the existing guidelines, foreign banks are required to set aside 32 per cent of their total lending for the priority sector.
“There is sufficient time (5 years from April 1, 2013) for foreign banks to adhere to the targets. In case, these banks run into problems, we will re-examine the guidelines for them,” Dr Chakrabarty said.
satyanarayan.iyer@thehindu.co.in
Keywords: gold prices, check, giving gold, dowry, offering, religious places, reduce, K.C. Chakrabarty, Deputy Governor, Reserve Bank of India.
Comments:
Who decides what gold is worth? It is real money that the government can't control
its value. You may consider it worthless, but that is what differentiates India has a
lot of poor and middle class people but having gold as an asset is a 5000 years proven
insurance policy, not debts. India is effectively richer than USA whose $ are not
required if you could buy oil with gold. The paper currency is a fraud on the people
why if there are so many poor people the rbi not abolishing the larger denomination
notes like inr 1000, because it only facilitates the rich and black money. Less
involvement of the government in the market by subsidies and running a large
bureaucracy will give more benefits. Jai hind.
Why do mercedes benz and bmw diesel car owners get diesel subsidy ?
Diesel subsidy is for trucks and farmers who own tractors and not to
super rich who own diesel cars. Government should first remove the
diesel subsidy for rich and super rich. That way they can save
billions of dollars in foreign exchange. There is no point blaming
poor common man on the street for buying gold as gold is the only
real hedge he/she has against inflation.
sir well said rich got richer & poor got poorest
This is one of the best statement i ever heard from the reserve bank of India. Why don't the government openly address people of the possible solution to solve the issue? I don't expect states persons to say this to create chaos. There are better ways they can find to educate people. Even in The Hindu this is not highlighted in the top. No one will bother will bother to read about this. There should be some cultural revolution has to happen to mindset of our Indian people.
Dear Sir, Instead of advising what people should do especially about gold offering to dieties and giving at the time of marriage to a daughter, why do not you so called intellectuals at the helm of affairs, in RBI and Government, control inflation and save everyone, from falling Indian Rupee.
If gold prices soar and we continue buying gold will it not lead to lesser money supply for other items of interest and consequently lead to lesser inflation on other essential goods.
Charity begins at Home!!! First, let DG, RBI advise banks to have limits on giving loans on Gold Ornaments. He is well aware that 60% portfolio of agriculture loan is only "Gold" Loans. And that is the only loan they can get over the counter. Rest all loans take weeks and months for processing. Till these shortcomings in banks are not curbed, people will have no option but to hoard gold to meet their immediate/ urgent finance requirements. Let us "Practice before we Preach"
The RBI Deputy Governor could have avoided such casual comments on gold. Bringing down gold import is the need of the hour. The best way to achieve this is to ‘unearth’ the domestic gold stock and bring the gold hoarded in households, accumulated in various religious institutions and with others for unethical use. There may not be a common cure for all these ills. But reducing the purity of gold offered to temples (in the absence of any user-friendly and reliable way to check purity of gold, this must be happening already, God knows!) should not be suggested as an option by a banker. Introduction of Gold-backed financial instruments which can be held in electronic form, in addition to the present Gold ETFs could another option. This should be widely marketed, with sovereign guarantee and easy liquidity. When ‘paper’ or ‘electronic’ gold is made available for investment, it would become easy to bring household savings invested in gold to the mainstream. MG Warrier, Mumbai
Dy Governor's advice is good but as an official of the Reserve Bank he should have analysed why the people prefer GOLD instead of other assets.Inflation is the major reason.The offerings to god in the form of gold come from black money holders and definitely not from middle class and lower middle class people.A serious check on black money by IT authorities can prevent this sort of investment in gold and offerings to GOD.Temple authorities can insist on the details of persons who want to offer gold as offerings.This will automatically bring down the gold offerings.Will they do?
Rich are subsidised by the poor is an age old practice in Indian economy and it is good to hear this from persons who matter and make policies.This is the fact in respect of pricing of all products in India and taxation policies.Agriculture Income is not taxed and huge subsidies are provided to rich farmers for their fertiliser and power consumption.The list is huge and the politicians and bureaucrats know this.
This is an unusual observation by RBI. 1. Is crude oil, which if imported,not used for productive purposes? That means, fuel used by the RBI governor for his car is not productive purpose. 2. How much of imported gold is used towards dowry and offering to God? If the observation made by the RBI is based on facts and figures, then this is an eye opener. Normal belief is that black money is hoarded in the form of gold and real estate in India. Escalation is the price of gold is worldwide, due to buying of gold by gulf countries who produce crude oil, and due to lack of faith in currencies whose value have deteriorated. RBI should clarify to the world that their observation is based on facts and figures.
Let me tell Mr. Chakraborty that wearing of coat/suit is not fit neither for our culture nor for climatic conditions prevailing in India. Instead it increases demand for more electric power ( also the other 'power') whence power is in great shortage.
It is too easy try to bring life threatening gold in some better indigenous investment like construction and giving it to jewelry exporters and other jewelers by giving incentives. Inland gold can also help in importing essential infrastructural goods like 100 million ton of steel can be purchased instead of 100 tons of gold we imported in a year. Even 10 % lost in these transfers by governments can be regained by various tax received by increased GDP. And not only gold but all of our imports are totally useless and most harmful for poorest Indians the vast majority of our population and thus can be replaced by cheaper indigenous substitutes helping the needy.
Now we got the clue, why Indian economy is going down!!
There is a need to re-baseline the process of recruitment of key post in
Finance Ministry and down under at least level of Deputy Governor of
RBI.
It is surprising the value of education has gone down under.
Let GOD save!! GOD, will donate 1 KG to make our economy back.
Why doesn't the RBI suggest the Government confiscate all gold from the residents of India like what US did during Great Depression!!! Rather than all your paper investments Gold is the only safest bet. Stop buying oil with Dolar and start buying it with Gold / Food. Don't be afraid that we will be Bombed. It is not possible.
Mr Deputy Governor, We really want to have something that acts as a
store of value than something else continuing to go down the drain.
Could you please attempt to curb INR depreciation first?
Mr. Chakraborty is out of tune with world economic crisis. The present euro crisis, is nothing but control of gold kept in US vaults by gold-rich countries like Spain, Italy and Portugal. Only one tiny nation was pragmatic enough to take away the gold from the vaults in USA. I think this enough and needs no elaboration.
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