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Bank tip on gold use

Bhattacharya: Weighing options

Mumbai, June 28: Two of the country’s biggest state-run lenders — the State Bank of India and Bank of Baroda — today pitched for treating a portion of their gold deposits as part of the mandatory cash reserve ratio (CRR) or statutory liquidity ratio (SLR), both of which banks consider as non-productive.

“Is it possible that the regulator can treat a little bit of our gold deposits as CRR or SLR? After all, gold is also a store of value,” SBI chairperson Arundhati Bhattacharya said at an event of the Gem & Jewellery Export Promotion Council here today.

With gold imports putting a pressure on the current account gap in the recent past, there is a greater need to make use of the gold available in the country and make it more liquid, Bhattacharya said.

According to Bhattacharya, the SBI is the largest player in the gold deposit scheme and is struggling to deploy the deposits in productive assets.

The CRR, at 4 per cent now, is the portion of deposits banks park with the Reserve Bank of India that earns no interest. SLR, at 22.5 per cent, is the amount of deposits banks have to mandatorily invest in recognised securities such as government bonds and other liquid assets.

However, the average SLR holding in the system is 27 per cent as banks use the treasury to boost bottomlines when advances are poor or bad loans rise.

Concurring with Bhattacharya, Bank of Baroda chairman and managing director S.S. Mundra said it “makes sense” to treat a part of banks’ gold deposits as CRR and SLR.

“When banks are holding gold, it is of value. I think it makes sense to bring it under CRR/SLR. It also fits the larger pattern that ultimately we are talking about, unearthing the gold and bringing it to productive sectors in the economy as a whole. The gold that is readily available can be brought under recognition,” Mundra told reporters.

 
 
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