Present time currency banking system is working mostly on paper note and gold is using to take mortgage loan but now need to chance the system of banking system by taking gold as deposit in MKS or CGS system and lend also by this system. Mostly households of any countries keep gold as assets other than jewellery. If we assume 20% of households gold is for investment purpose then government can allow this by banking law deposit and lending.
Present time as per World Gold Council India, China and US households have big gold exposure as investment purpose if Gold bank were attract only this investment purpose gold then this will be a big achievement. As per WGC Indian households have 25 thousands ton gold if Gold bank attract only 20% of this then this will be highest boost up for Indian economy.
Benifits -
1. People get a new instrument for earning.
2. Banks were get gold deposits and can lend on gold fluctuations lending rate or discount by Central bank.
3. Central bank will receive gold reserve ratio as 3% to 4%.
4. Government will receive statutory gold ratio 18%.
5. Economic activity will increase that will boost economy.
Government should allow gold deposit and lending and use gold to produce digital currency to boost GDP. Accept deposit & lending in gold termology as 100 gm gold deposit interest 2% and lending interest 4%. Apply this method in banking system.
For Gold term loan lending use GFIR (Gold fluctuations interest rate) so corporate and institutions can borrow on low interest near 4% - 5% annual rate. GFIR is a tool that cut the interest rate and risk of banking system.
Present time only big businesses group borrow as ECB ( external commercial borrowing ) on 4% to 5% interest rate.
A new idea can provide extra regular income to households so need to use gold as side currency. Bank should accept deposit and lending in gold termology.
As per indian example If 10% of household gold (2500 ton) were deposited in banks then GDP may expand 15% nominal.
When any household earn regular interest on gold then this extra earning will boost demand in economy short to long term. Banking lending capacity will increase and this will create derivative deposits 4 to 5 times.
Government should work on three front. First Use gold as currency to strengthen rupee against other foreign currencies. Gold near house hold can play important role for economy. Government should allow to add a gold transaction law for term deposit and gold term lending in banking system. Need to add a section of gold measurement in All types of savings, Current and dollar account. then make a deposit center of gold inside or outside of the bank. Give interst of gold term deposit in gold measurement.
Like 100 gram gold saving account interest 2.5 gram of annual interest. Give also interest on Current account gold deposit 1% per annum this step will increase HNI & businessman to deposit their gold for extra earning. people are free to deposit & withdraw any time. Need to start gold term time deposit like F.D., Bond, debenture etc. Start gold term loan as 100 gram lending interest 5% per annum. Thus RBI (central bank) will get benifit through gold reserve ratio without interest like CRR near 4%, government will get statutory gold ratio like SLR near 18% in low interest rate, banks get more fund for lending, public get more choice for earning.
Corporate and MSME enterprise get gold term loan which is beneficial at time of downtrend prices. Government can cap gold term loan 30% of all loan outstanding. Banks may allow borrowers to change gold term lending in rupees and rupees lending in gold after six month. If in next five year banks will become successful to attract gold term deposit and lending then Indian economy may touch 10 trillion dollar in next 5 years. Last conclusion Use gold in banking transactions and produce digital currency.
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