Monday, June 30, 2014
State Bank of India (SBI) and Bank of Baroda (BoB), two of the largest public sector banks of India, proposed on Saturday their gold deposits should be allowed to count toward their state-mandated cash reserve ratio (CRR) or statutory liquidity ratio (SLR).
Arundhati Bhattacharya, the chairperson of SBI, made the proposal at a Gem & Jewellery Export Promotion Council event held in Mumbai on Saturday. She said the need for gold deposits to become more liquid has increased because gold import is putting a strain on the country’s current account deficit. S. S. Mundra, Chairperson and managing director of BoB, agreed and said it would help bringing gold into the more productive sectors of the economy.
Bhattacharya added SBI has no longer any incentive to run its gold deposit scheme as it cannot fully deploy the assets, noting SBI is the party most involved with gold deposits in India. G. S. Sandhu, Union financial services secretary, also at the event, responded that the government is looking for ways to monetize the gold held by the public, as import of gold can strain the current account deficit and foreign exchange reserves.
Currently, the Reserve Bank of India has set the CRR at 4% and the SLR at 22.5%. SLR is the portion of deposits that must be invested in recognized safe securities and assets.