By  Paul Ploumis 10 Aug 2015  Last updated at  08:29:38 GMT

The much awaited 'gold monetization scheme' is expected to be launched during first week of September, according to sources close to Indian Finance Ministry

MUMBAI (Scrap Monster): The Indian government plans to roll out the much awaited gold monetization scheme by first week of September. According to Finance Ministry sources, the government has proposed some final changes to the scheme. It intends to seek cabinet nod within one to two weeks so that the scheme could be finally launched before second week of next month.

The draft proposal released earlier had allowed banks to consider gold deposits as part of their reserves. Banks were also allowed to sell the deposited gold to generate foreign currency, which could then be used for lending to traders. They were also allowed to convert the gold into coins and sell them. However, the latest note from the Finance Ministry states that banks will not be allowed to use gold deposits as part of their Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). The Finance Ministry is said to have arrived at this decision during its final talks with the Reserve Bank of India (RBI).

The proposed monetization scheme intends to mobilize idled household gold which could replace imported gold. Even if the scheme is able to attract 200 tonnes of deposits every year, it could help reduce India’s gold import bill by over $9 billion in a year, which in turn could bring in more stability to country’s trade balance.

The scheme is expected to be launched in major cities initially. Later, it will be extended to other cities as well. The deposits of yellow metal with the banks are expected to offer tax-free returns to retail investors and institutions. The investors and institutions could open a Gold Savings Account with designated banks after can getting the gold certified by BIS-hallmarking centre. Interest could be earned in cash or gold units. The minimum investment period will be one year, Finance Ministry sources indicate.