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Tarapore suggests revival of gold bank plan

The proposal to establish a gold bank, with unfettered right to deal in gold, should be revived and this bank should handle the country's gold reserves, said former Reserve Bank of India governor S S Tarapore.

Delivering the annual lecture on 'India's external sector -- an agenda for reforms' organised by the A D Shroff Memorial Trust in Bombay, Tarapore said the idea of starting a gold bank, which was abandoned in 1992, should be regarded by the authorities as a 'golden opportunity'.

"The gold bank should have the right to import, export, trade, lend and borrow gold and deal in gold derivatives," he said, adding that its role should be that of an intermediary in gold transactions, providing liquidity to holders of gold.

He also said the RBI should activate its gold holdings by treating the precious metal as yet another reserve asset and undertake in and out movements in gold, in the same way as it does for other reserve currencies.

He, however, felt that the bank, in its initial stages, should be given a restricted role. "The important point is to recognise the liquidity needs of gold holders and opportunities it provides for institutional development," he added.

UNI

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