Gold Savings accounts can reduce India's bulging current account deficit

The introduction of GSA would act as a catalyst in the country's efforts to have a solid national gold policy that links all the gold value chain stakeholders,  Economic Times reported.

People can open their GSA in banks and make deposits on a regular basis, the report said citing sources.

At the time of the withdrawal, a debit entry will be made in one's passbook and cash withdrawals will be offered at the price of 1mg of gold or in its multiples.

The withdrawal amount will be based on the prevalent rate of gold on that day.

Currently, India's gold imports have doubled to USD 38 billion which is the prime reason behind the country's humongous current account deficit, according to Ministry of commerce and Industry's data

In the quarter ended Sept. 30, 2021 the current account deficit stood at USD 9.6 billion, it said.

To make the gold market more structured, the government could develop gold as an asset class, ET reported.

Shekhar Bhandari, President and Business Head of global transactions at Kotak Mahindra Bank, said,“The Reserve Bank of India can regulate these gold savings accounts and can ask the banks to hedge against gold.

"If this happens, then it will be a good thing for the gold trade. We have seen how well the SGB has been accepted in the Indian market. The government will also look at strengthening the digital gold transactions."

The GSA would also accommodate the interest of rural India by helping them avoid labour charges, taxes on jewelry and coins, Hindustan Times reported.