Manangment Tip of the day - Learn From Your Rivals

HBR :FEBRUARY 15, 2013 Competing with a work colleague can feel like a waste of time. Why do you care so much about what she does? Why is she obsessing about your accomplishments? But rivalries like these can help answer two important questions: What are my weaknesses? Rivalry is often a form of envy: Your competitor has a trait or skill you (sometimes grudgingly) admire. If you find something incredibly irritating about him, think about whether it's because you lack the very competency you're criticizing. Am I thinking big enough? Stalking a rival can unlock breakthrough possibilities for growth. If she is inventing a new product or launching a new initiative, is there something you can do that would have an even bigger impact? Today's Management Tip was adapted from "What You Can Learn from Your Professional Rivals" by Dorie Clark.

Subbarao will keep a sharp eye on Chidambaram's budget

RBI Governor D. Subbarao (left) and Finance Minister P. Chidambaram

BT :Anand Adhikari  : February 14, 2013  | 20:17 IST

Falling gross domestic product (GDP) and inflation numbers are clearing the road for a further softening of interest rates in 2013 - if and only if P. Chidambaram plays along. 

Reserve Bank of India (RBI) Governor Duvvuri Subbarao has all along talked about the need for a sustained decline in inflation and a faster and more credible road-map for fiscal consolidation, especially of the fiscal and current account deficits. That was the prerequisite to slash interest rates. 

There is encouraging news on the inflation front. The wholesale price index (WPI) came down sharply to 6.62 per cent in January from 7.18 per cent in December last year. 

Last week the Central Statistical Organisation's advance estimate of a decade low five per cent GDP growth in 2012/13 fuelled talk of the need for an interest rate cut.

But the journey to lower interest rates will not be easy because of an impending general election next year. All eyes will be on Finance Minister P. Chidambaram's 2013/14 budget to see how he plans to rein in the fiscal deficit. And more importantly, how he balances rising expenditure on welfare schemes while reining in the deficit. The current budget is going to be the last full budget of the United Progressive Alliance (UPA) government in its current term. Inevitably, there are expectations of goodies such as food security. Recently, Sachin Pilot, a minister in the UPA government, also hinted that the government could announce another farm-loan waiver scheme. Such proposals will make it hard for Chidambaram to contain the fiscal deficit.

The policy or repo rate, which is the rate at which the central bank lends funds to banks, was last tinkered with in April last year. At the time, the RBI instituted a 50-basis-point cut and followed it up with a 25-basis-point cut in January this year. 

In the past, the RBI addressed the liquidity issue by slashing the cash reserve ratio (CRR), which is the amount of cash banks have to maintain with the central bank. It also infused liquidity through open-market operations, buying bonds from banks. 

If Chidambaram manages to please all while controlling the fiscal deficit, he will make it easier for the RBI to reduce interest rates.

Facebook Admits They Were Hacked, Assures That User Data Not Compromised

We’re sure that many of you dread the thought of your Facebook account being hacked, especially those who keep their profiles extra guarded and only viewable to close friends or family. In any case it seems that Facebook has recently admitted that they were hacked, and this was actually brought about when some of their staff unknowingly installed malware on their laptops. While the attack is said to have been sophisticated, you might want to breathe a sigh of relief because according to Facebook, while an attack did occur, they claim that no user data was compromised. In a statement released by the company:

Last month, Facebook Security discovered that our systems had been targeted in a sophisticated attack. This attack occurred when a handful of employees visited a mobile developer website that was compromised. The compromised website hosted an exploit which then allowed malware to be installed on these employee laptops. The laptops were fully-patched and running up-to-date anti-virus software. As soon as we discovered the presence of the malware, we remediated all infected machines, informed law enforcement, and began a significant investigation that continues to this day.

In any case we can only take their word for it, but Facebook is said to be currently working with law enforcement agencies and other organizations who have been thought to have been attacked via the same exploit.

Budget 2013 :Keep your expectations low

A file photo of Finance Minister P Chidambaram

In a spirited panel discussion moderated by Business Today editor Chaitanya Kalbag (CK), Yashwant Sinha, MP and former finance minister, M. Damodaran, former SEBI chairman, Satya Poddar, Partner, Ernst & Young, Samiran Chakraborty, Regional Head of Research, Standard Chartered Bank and Nilesh Shah, President, Corporate Finance, Axis Bank, shared their views.

 BT  Edition: March 3, 2013:Edited excerpts

Chaitanya Kalbag: All indicators point to a very disturbing situation. Mr Chidamabaram has already pushed in measures that should have been part of the Budget. I think something is afoot.

It needs real fighting spirit to reduce the burden of subsidies: Yashwant Sinha

Yashwant Sinha: Whenever a finance minister sits down to prepare the Budget, there are five or six issues he has to keep in mind. The first is macroeconomic issues: the current macroeconomic issues are the various deficits, inflation which refuses to go away, interest rates as a result of that, and then savings and investment, which will include the flow of foreign funds - FII and FDI.

Now, we discussed this last year, that the last Budget was the last chance Budget of the UPA government because the next Budget would be just before elections, and this year is the last full Budget of the UPA government. Next year would be a vote on account Budget. So, whatever has to be done, has to be done now. Last year's Budget was clearly regressive. We went backwards. And now when the old finance minister or the new finance minister has taken over again (Chidambaram taking over from Pranab Mukherjee), he is trying to reverse everything that Pranab Mukherjee did. So much change does not even occur when governments change.

CK: We talk about the problems of the coalition, but in this case, they are both from the same party.
Sinha: The same party, the same prime minister. The prime minister is as much involved in the Budget exercise personally as perhaps the finance minister. And he is privy to every decision that the finance minister takes. In fact, the Budget speech is taken by the finance minister to the prime minister for a look; the prime minister proofs the Budget speech, only then it goes into print. The only freedom the finance minister enjoys is to insert a quotation... or some poetry.

The finance minister has options, he has very difficult options. I understand, he has reduced the expenditure of the government by over Rs 100,000 crore in this year's Budget. But he has a very difficult task. The starting point has to be control of the fiscal and revenue deficit. Whatever maybe the immediate price that the government has to pay, it is important in the national interest that the government does it. A bitter pill today will lead to better health tomorrow. If we don't do it, then we are going further downhill. That is the starting point. If the FM is able to rein in the fiscal deficit at 5.3 per cent in this year's Budget and 4.6 per cent in next year's Budget, then I will compliment him and say he has made a strong beginning. Austerity will not save us tonnes of money, but will send out the right message.

It appears on the expenditure front in these nine years, the government has followed a very expensive, reckless policy. I am reminded about the comment that Dr I.G. Patel made about the Rajiv Gandhi era that "he has spent as if money didn't matter." This is why fiscal deficit has to be reined in, which will have an impact on inflation.

There is excessive dependence on foreign institutional investment: M. Damodaran; Compliance has gone down. An aggressive tax administration is scaring foreign investors: Satya Poddar

CK: Mr Damodaran, would you like to say something about the situation?

M. Damodaran: Austerity sends a message, but it is not the complete package. By doing a little less of the same, you cannot get a solution that is sustainable and can serve you in the long run. I believe that somebody should take time off from the here and now, and look at the Budget in
detail and see what needs to survive.

I also believe the huge positive we have is that there is a recognition and understanding of the nature and dimensions of the problem. What you need is putting in structural solutions, and they will emerge only from zero-based Budgeting.

Two-three points I think are important. One, I think there is excessive dependence now on foreign institutional investment, especially through participatory notes, and to my mind, in the long term, this can be hugely destabilising. It is all right in the short term, you find that flow of money has dried up and you are agnostic about the instruments through which the money comes in. That is not a long-term solution. We need to ensure that the Indian contribution to the Indian growth story is more than what it is at this point of time.

In India, we find increasingly a practice which is called nothing succeeds like a successor, the predecessor is necessarily wrong.

CK: We did some analysis and it showed that in the last nine years this government has been constantly reversing direction, you do something and then you undo it.
Damodaran: In fact, if you talk to people within and outside the country they will tell you, make whatever provisions you want to, but do two things: let those provisions stay unchanged for a while, so that we get used to it and we can plan our businesses and our life on that basis. Number two, state it simply, we do not want too many ifs and buts, which then makes it paradise for lawyers. Make laws a little simpler.

These are the two things people are asking for. Some continuity, some certainty, some clarity on what the provisions are.

CK: So, Mr Poddar, taxation is being frequently referred to. I am very interested to know what you have to say.
Satya Poddar: On the taxation side, the government has been trying to mobilise additional tax revenues. As a result rather than mobilising additional revenues, the tax system has become less productive than before. Compliance has gone down. A very aggressive tax administration is scaring foreign investors. There are increasing volumes of disputes in the courts on issues which should not have been debated at all. In countries like Britain, Japan, there are no more than one or two court cases of transfer pricing. In India there are 4,000 transfer pricing cases each year and none of them gets resolved and then the government of India says or the ministry of finance says that we have Rs 40,000 crore in demand of transfer pricing cases which is a method of bringing back illegal money. Now transfer pricing and illegal money have absolutely nothing in common. Transfer pricing is nothing but a division of a declared income between two governments.

Now take the example of GST, (goods and services tax) in 2006/07 they announced they will have GST in five years. For the first four years nothing was done, no serious study, no task force was created and the issues were discussed at very casual meetings more like a tea party.

Number one on the GST front, they need to go back to the basics. The constitutional amendment Bill that was tabled was clearly flawed. The government was not serious about implementing it and there was no consensus on it. Now they have reached a compromise. In my view, compromise is still the second best. The government should still take some time to see if they can get a better model.

My own feeling is that the Centre has given up. Mr Chidambaram's view is let me get GST, no matter how good or bad.

Now you talk about taxation of the rich. My own view is who are the rich that you are trying to tax, and I divide the rich into three packets: the working rich, the investor rich and the invisible rich. Working rich are basically the employees who do work. All of their income is fully reported and is fully taxable and they are the ones who are in the universe of tax returns filed. I have a feeling that 80 to 90 per cent of the so-called rich, say, more than Rs 50 lakh to Rs 1 crore of income, are really the employees who have done well through their efforts and are getting good salaries.

Then you have the investor rich. The investor rich are essentially those who have done well, but they get their income predominantly from capital gains and dividends and maybe interest. And those incomes by law are not taxable. Capital gains are all exempt on listed securities. Dividends are not taxable at the personal level, they are only taxable at the corporate level and even interest income - if they have tax-free bonds or other instruments - even that is not taxable. So those incomes perhaps are declared because they are not taxable in any case. Now that's where you have no tax. Now when you say the rich should pay more tax, I say by all means, but then define the rich to include all the three categories. If you simply increase the tax rates in the name of rich paying more tax you are basically going to increase more burden on the employee class which is already a very significant contributor to the tax system.

CK: Dr Chakraborty, how do you see things from the commercial capital of the country?
Samiran Chakraborty: I would start by saying that the drop in growth rate from nine per cent plus to just five per cent in five quarters. What we are observing today is probably that five per cent is being arrested; we are not dropping any further for almost four quarters now. We are kind of stagnating around that five per cent mark. We are yet to see distinct macro improvement coming in terms of growth numbers. So, my point is very simple that our growth slowdown is primarily investments slowdown, which is now getting translated into a consumption slowdown. Now, the investments slowdown is because of three broad reasons - one is obviously the high interest rate effect, and two is all kinds of approval related issues, and three is that at this point of time if we take the top 500 companies in India, their debt equity is at a 10-year high. We will see a pretty slow recovery in investment because of high leverage.

So, essentially 2013 is also going to be a year of relatively slow growth. I completely endorse the view of fiscal consolidation. There is a lot of skepticism in the market whether it can deliver on the 5.3 and 4.8 [fiscal deficit] or not. He does not have an option of presenting a radical Budget this time around.

CK: Mr Shah, since you watch the markets so closely, what I am interested in hearing from you is: what continues to influence investors' sentiments? Some of us are very worried about what is coming our way, but others are very happy.

Essentially, 2013 is also going to be a year of relatively low growth: Samiran Chakraborty; There is huge liquidity globally, which can come to India: Nilesh Shah

Nilesh Shah: One simple point is that, from the domestic investor point of view the market is nearing an all time high, but if you are a global investor it is 30 per cent lower than the all-time high because of rupee depreciation.

One thing we need to remember, globally there is huge liquidity, almost $7 trillion has been injected into the global coffers, which can come to India. Interest rates globally are one of the lowest in the history of mankind. And India, today can take advantage of the highest ever liquidity and lowest ever interest rates. 2003 to 2008 was the golden period of Indian growth. One of the prime factors was drop in interest rates. The government of India used to borrow at 14 per cent in 1996/97 and it came down to around five per cent in 2003/04.

Interest today is onethird of our total income. The government spends one-third of its income just paying interest rates. If we can bring down interest rates through some efforts, it releases so much of pressure from the fiscal deficit side. These are the things which can be done.

CK: Mr Sinha, where do we go from here?
Sinha: Whoever it was in 2009, and you know who it was, inherited a badly damaged economy and I said in the Lok Sabha one day, "I am glad we did not come in power." Because if we had come in power in 2009, we would have been squarely blamed for ruining a perfectly healthy economy. Be that as it may, I think the 2014 situation is going to be very grim. A modern economy runs on sentiment. It is so much arithmetic, but it is also sentiment, and sentiment depends on the political will of the government of the day.

I don't think this Budget is going to help this way or that way because everyone is looking forward to 2014 or whenever the next elections are held. So, really the challenge is for the next government, whichever is to ensure that sentiment in the economy improves.

So, I don't expect very much to happen in this Budget which will help the economy move forward. On the taxation front, which has been a major part of discussion we had here, I would entirely agree with Mr. Poddar. that it is better not to have GST than to have a moth-eaten GST. As far as DTC is concerned, the recommendations of the parliamentary standing committee are with the government and they are in a position to pick up elements which are useful from the DTC and introduce them in this Finance Bill. As far as GST is concerned, I have been saying it for a couple of years now that you leave the states, for the time being, why don't we have a central GST. Let's have a central GST and this will then become a powerful tool to convince the states that GST can work. If it can work it at the central level, it can work at the state level.

I don't agree that we should be adventurous as far as taxation is concerned. It pays to be conservative. Let the rates be stable. Let's not indulge in all this talk of taxing the super rich and inheritance tax and all that. This is not the time to do it.

CK: What would you do, Mr Damodaran, if you were finance minister?
Damodaran: Won't be, luckily. My wish list is: not higher taxes but better tax administration. Secondly, I would like to see investments in skill building. We talk about demographic dividend, but this is not a dividend, unless you invest in skills, skilling and re-skilling. In fact, some of the NREGA funds you can scale down and use that for skill building which this country needs, otherwise those large numbers between the 18 and 35 age group will be a liability.

CK: Dr Chakraborty, what you would like to see that would make you more optimistic about this Budget?
Chakraborty: After the promises that the FM has made in the last few weeks, any slippage on the fiscal side will spell disaster for foreign investment sentiment. We need a more balanced approach to the fiscal deficit where we need to get our tax-GDP ratio back to about the 12 per cent mark. We need to keep the tax rates as far as possible stable. We are almost on the verge of overhauling the direct tax structure and indirect tax structure, before that overhauling happens, a kind of ad hoc measure to tweak things would not be a great idea. In terms of expense reduction, capital spending should get priority and revenue spending, as much as possible, should be curbed. And lastly, financial savings side is a serious problem that is not getting highlighted enough. So, unless we get the savings rate back up to 33-34 per cent, it is very, very difficult to imagine that we will get out of the five-six per cent of low-level growth.

CK: Mr Sinha, how can we reduce the monstrous subsidies?
Sinha: Subsidies have always been treated as holy cows. It needs real fighting spirit to reduce the burden of subsidies, The best way to deal with subsidies is to target them properly. Now this is where the cash transfer scheme becomes useful. The other is that, we should evolve a formula, that the moment your input cost goes up, your output price will go up. You raise the minimum support price for agricultural produce, automatically in PDS foodgrain prices will go up. Now where it is serving an economic growth purpose, you should let it survive, and all the rest of it should go to a targeted population.

CK: Dr Chakraborty, do you see the risk of an asset price bubble?
Chakraborty: It's difficult to define bubbles, let me put three things: when we did this huge cash infusion in the economy post the financial crisis, there was no capacity in the economy to absorb the cash. That's why we saw inflation playing up.

Second, because you don't have tax-adjusted real returns on different kinds of financial instruments, some of the money is going into real estate and gold, creating a bubble-like situation. And the third kind of bubble could get created in the equity market but the valuations are not as much stretched as they were before the crisis, there is a little bit of room on the equity side.

CK: It has been a fascinating discussion. Any final comments?
Damodaran: There are limits to talking up the economy, now we'll have to walk up the economy. 
Poddar: Don't spring any more surprises. Stay bold and demystify.
Sinha: My advice is: keep your expectations low.

Photographs by Vivan Mehra, Aditya Kapoor and Nishikant Gamre
Imaging by N.Ravi Shankar Reddy

Cognizant CEO Francisco D'Souza in GE Board

Francisco D'Souza, CEO, Cognizant 
Photo: H.K. Rajashekhar/www.indiatodayimages.com

PTI    Chennai   February 16, 2013  | 14:42 IST

The Board of Directors of global conglomerate -- General Electric-- has inducted Francisco D'Souza, CEO of Nasdaq-listed Cognizant, into its board.

"Frank D'Souza brings great perspective as a leader and a pioneer in services and software. Our focus on helping customers achieve greater productivity through GE technologies make his views all the more valuable for our company", GE Chairman and CEO, Jeff Immelt said in a statement.

D'Souza's induction as an Independent Director, takes the strength of General Electric board to 19 members, 17 of whom are independent, it said.

"I am honoured to join the board of GE -- a company that has been an icon of innovation and management since it was founded", D'Souza said.

D'Souza is one of the founders of Cognizant and has been its CEO since 2007. He is also the Director, US-India Business Council, the statement added. 

World's tallest statute of Mahatma Gandhi was on Friday unveiled in Patna in Bihar.

H T: Patna, February 15, 2013

With a towering height of 70 feet, the world's tallest statute of Mahatma Gandhi was on Friday unveiled in Patna in Bihar.

'Bapu' is seen standing affectionately with two children on either side in the bronze statue constructed at the historic Gandhi Maidan in Patna.

Funded by the state government, the Rs. 10 crore statue, inclusive of a 30-feet-high pedestal, has been built by Delhi-based sculptor Ramsutar and Sons.

With this, the Parliament statue in New Delhi where the 'Father of the Nation' is in a meditating pose, becomes the second tallest Gandhi statue with a height of 16 feet.

Stating that is a small tribute to the great leader, Bihar chief minister Nitish Kumar said his mantra of non-violence will motivate the weaker sections to seek their rights in a peaceful manner, but with persistence.

"The tallest leader of our country and flag bearer of world peace will continue to inspire youths for generations," he said after unveiling the statue at a function.

Plaques have been added to the statute recalling various movements led by Gandhi during the freedom struggle.

Some valuable Gandhi quotes have also been written on the plaques to remind people about the message 'Bapu' gave during his lifetime.

Sculptor Anil, who runs 'Ramsutar Arts Pvt Ltd', said the statue, showcasing Gandhi with a smiling look, will spread the message of world peace and motivate all to bridge the divide between the rich and poor.

5 Indian Diamond Moguls Who Rule Global Empire

Diamonds speak louder than words, making it easier for many to express themselves with ease, suave and style. 

As the world is smitten by the glitter of diamonds, here are five Indian diamond sultans who have mastered the craft and reached the paramount of success in the global diamond regime,

 as reported by ET.

Mehul Choksi
Turnover Rs 13,000 crore
Chairman and MD, Gitanjali Group

The Chairman and MD of Gitanjali Group, Mehul Choksi has been running the company since 1985. At first, Gitanjali’s core business was trading in rough and polished diamonds and was one of the biggest exporters of raw diamonds worldwide. Gitanjali entered the international jewellery market and gradually expanded the business over the years. When Mehul realized that by selling diamonds as a commodity Gitanjali was not attaining its full potential, and then Gitanjali products were released.
At present, Gitanjali's product portfolio has several brands that include Nakshatra, Gili, D'damas, Asmi, Sangini, Diya and Maya. Gitanjali group acquired Samuel Jewelers Inc in U.S. in 2006.  Gitanjali has direct access to the U.S. retail market with its 111 high-end stores under Samuel Jewelers Inc. Some of the popular brands sold in the U.S. are Passion Stone, Love Universe, Lune Dargent, Affiance and REVV. The company has got its grip on Italian brands too like Stefan Hafner, Valenete, IO SI, Porrati and Nouvelle Bague.

Mavji Bhai Patel
Turnover Rs 7,700 crore
Kiran Gems Private Limited

Mavji Bhai Patel is the managing director of the family-run industry Kiran Gems Private Limited, which is the world’s largest manufacturer of small white diamonds. About the business, Mavji said, “My father was cotton farmer living in a village of 500 people in Gujarat's Bhavnagar district. We are first-generation entrepreneurs,” as reported by ET. Mavji's eldest brother and chairman, Vallabhbhai S Patel shifted to Mumbai with some start-up capital from their father in 1985 and started the company.
Today Kiran Gems is the country’s largest exporter of diamonds and jewellery. It also has the largest number of employees in the diamond industry, with the strength of 30,000 craftsmen who handle over 5 million carats in rough diamonds every year.
Mavji considers Kiran Gems getting sight holder status from DeBeers, as his most precious memory in business, he said, “It was fantastic.” He also said that the company is one of the largest suppliers of jewellery to stores in the U.S. However, there aren’t any immediate plans to enter the Indian retail market by the company. The most unique selling proposition of the company is selling diamonds of all sizes, from 1/100th of a carat to 10 carats.

Nirav Modi
Turnover Rs 5,000 crore 
Firestar Diamonds

Being from a diamantaire family  Nirav Modi stepped out in 1999, in the search of world’s finest and rarest diamonds. Modi started buying white stones from Russia, yellow diamonds from Sierra Leone and pink diamonds from Argyle. By 2005, Firestar Diamonds acquired a company with a network of jewellery sales in New York. It also acquired Sandberg & Sikorski in 2007 and became the sole jewellery supplier in all defence bases in U.S. Modi took his biggest chance in 2009, in spite of the market slowdown, he set up seven manufacturing units in six countries, including Russia and Armenia, where he is the only Indian contender.
He started his ‘Nirav Modi’ brand after by chance discovering the artist in him when he designed a pair of earrings for a friend.
Sourcing rare diamonds like the renowned Golconda diamonds is Firestar’s unique selling proposition.
As a mark of achievement, in 2010 Modi’s Golconda Lotus necklace in a cut, patented by him was auctioned at Christies's for Rs 16 crore.

Dharmesh Shah
Turnover Rs 1,835 crore
Joint MD & CFO, Asian Star Company

In 1971 the Asian Star Company was kick started in partnership by three cousins Arvind Shah, Dinesh Shah and late Prabodh Shah, a firm set-up for diamond processing with a small diamond processing unit in Surat.
In 1990 the second generation of the Shahs took up the business and ventured further. Dharmesh Shah is the firms joint MD and CFO with his brother Vipul Shah of Gem & Jewellery Export Promot Council.
When Dharmesh took the reins, the turnover of the company was around Rs 350 crore. In the 2012 financial year the company’s turnover figure stood at Rs 1,835 crore. Asian Star has plans to merge its position in the core business of diamond processing, with further exploring in the jewellery manufacturing business in future. The company does not promote consumer brands as it is a B2B company. The expansion of the business in the emerging markets is the company’s key element of success and the unique selling proposition is its fine craftsmanship.

Russell Mehta
Turnover Rs 4,000 crore
Rosy Blue (India)

Belgium-based Rosy Blue is among the world's largest diamond jewellery companies which own the retail brand Orra. Run by the Mehta family Rosy Blue is a privately-owned company which today owns two legal entities, one operating in India labeled as Rosy Blue (India) and the other is branched out in the rest of the world, which shares the Rosy Blue trade name. The head of the company, Russell Mehta said, “Rosy Blue is a 'family corporation'. We have evolved differently from most diamond companies, which are managed by the core family. We have trained and groomed professionals to take over key job of trading diamonds which I don't think many other companies have done. This allowed us to scale up,” as reported by ET.
Orra is the Indian retail chain of Rosy Blue, it has over 30 shops in the country. Rosy Blue is a grand veteran in the industry and stays at the top with sustainability integrated into heart of business.

The sale of global diamond jewellery continues to grow and has shown a threefold increase in the past 25 years, which has a current worth in excess of $72 billion per year. Icing the world with the most amazing selection of diamonds these men know how to play with the rock and stay on top.

RBI modifies Gold Deposit Scheme guidelines to be complied by Banks for dealing in Gold

 


Gold Deposit Scheme

 R B I CIRCULAR DBOD.No.IBD.BC.81/23.67.001/2012-13, dated 14-1-2013

The Central Government, with a view to bringing privately held stock of gold in circulation, reduce the country’s reliance on import of gold and providing its owners with some income apart from freeing them from the problems of storage, movement and security of gold in their possession, had notified Gold Deposit Scheme 1999 on September 14, 1999. Accordingly, Reserve Bank of India vide circular No IBS 912/23.67.001/99-2000 dated October 5, 1999 had formulated guidelines for Gold Deposit Scheme to enable banks authorized to deal in gold to prepare their own Gold Deposit Schemes.

2. The Central Government (Department of Financial Services, Ministry of Finance) has now issued a Notification No.G.S.R.46(E) dated January 24, 2013 enabling Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations to deposit part of their gold with the banks under the scheme.

3. In view of the above, the guidelines enclosed with our circular dated October 5, 1999 for operation of the Gold Deposit Scheme have been modified as under:

 (i)  Under para 5, presently the banks may either issue a passbook/statement of account or a certificate/bond to the depositors for deposit of gold, which will be transferable by endorsement and delivery.

In terms of the Government Notification dated January 24, 2013, the Gold Certificate would also mean the final receipt, in dematerialised form or otherwise, issued to a subscriber of the Scheme after the gold tendered by him has been assayed as specified in para (ii) below and accepted as deposit by the bank. The gold deposit certificate shall be transferable by endorsement and delivery, as hitherto. However, in case of certificates issued in dematerialized form, the depository rules for transfer would apply.

(ii)  Under para 6 it is stated that there will be a preliminary assay to ascertain gold content/caratage in jewellery by a non-destructive technique such as X-Ray/karat meter followed by a fool-proof method like fire assay.

It has now been decided that the exception from fire assay / destructive assay will be provided for physical Gold tendered by Mutual Funds/ Gold Exchange Traded Funds approved by SEBI and complying with the Good delivery norms of the London Bullion Market Association (LBMA) having a fineness of 995.0 parts per thousand accompanied by a certificate acceptable to the designated bank.

(iii) Under para 7, the Resident Indians (Individuals, HUF, Trusts, Companies) may invest in the scheme.
In terms of the Government Notification dated January 24, 2013 referred to above, a Trust including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations may deposit under the scheme.
(iv)  Para 12 states that the deposits may be made available within a maturity range from three to seven years.
It has now been decided to change the maturity period, of gold deposits, ranging from six months to seven years.
(v)  Para 22 mandates that details of the scheme designed date from which it will be operational and the branches from which it will be operated, may be advised by the banks proposing to introduce a gold deposit scheme to RBI for obtaining its approval.
It has now been decided that authorised banks would not be required to obtain prior approval of RBI for introducing the scheme. Banks should, however, inform the details of the scheme including names of branches operating the scheme to RBI. Banks would be required to report the gold mobilised under the scheme by all branches in a consolidated manner on a monthly basis in the revised format (Annexure).
4. Other guidelines enclosed with the above mentioned circular, as amended from time to time, will remain unchanged.

ANNEXURE

GOLD DEPOSIT SCHEME STATEMENT FOR THE MONTH

A. MOBILISED DURING THE MONTH/YEAR ________________________________
Sl. No Category of Investors Gold Deposits Total Illustrative Term of Deposits
Jewellery Non-Jewellery No. of Depositers Weight 6 mths – 3 years 3-5 years 5-7 years

No. of Depositers Weight In grams No. of Depositers Weight in grams (Col.3+5) (Col.4+ 6) Weight in grams of gold received
1 2 3 4 5 6 7 8 9 10 11
1. Brought Forward  
2. Additions during month  
a. Individuals/HUF  
b. MF/Gold ETFs  
c. Others  
3. Closing Balance  
 
B. DEPLOYMENT OF GOLD MOBILISED DURING THE MONTH (Weight in Grams)
1. Brought Forward
2. Deployment during month
a. Sale to Banks
b. Sale to Others
c. Loans to Domestic Jewellers
d. Loans to Jewellery Exporters
3. Less: Repayments during the month
4. Closing Balance

C. REDEMPTION/PREMATURE WITHDRAWAL (Weight in Grams)
1. Brought Forward
2. Individuals/HUF
3. MF/Gold ETFs
4. Others
5. Closing Balance

D. SUMMARY OF TRANSACTIONS SINCE THE LAUNCH OF THE SCHEME (Weight in Grams)
1. Total mobilization (closing balance of section A Col.8)
2. Total Deployment (closing balance of section B)
3. Total Repayment (closing balance of section C)
4. Balance in Hand