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.
“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.”
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.