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B. N. VAIDYA & ASSOCIATES
EXPECTATIONS & CONSTRAINTS OF BULLION
TRADE
- BHARGAVA N. VAIDYAe – mail bnv@vsnl.com
30th October 2004
B. N. VAIDYA & ASSOCIATES
INDUSTRY TARGET
• MAKE INDIA No. 1 BULLION DEALING CENTER
• TO UTILISE INDIA’S VAST GOLD ASSET IN PRIVATE SECTOR
• TO ACHIEVE A POSITION SIMILAR TO DIAMONDS IN JEWELLERY
B. N. VAIDYA & ASSOCIATES
HISTORY• Net Gold Surplus – for years• 1962 - Gold Control Act.Development• 1990 – Abolition of Gold Control Act• 1992 – NRI Imports• 1994 – SIL Import• 1997 – Authorised agencies / Banks• 2003 - Future/Forward trading in bullion• 2004- ????
B. N. VAIDYA & ASSOCIATES
EXPECTATIONS
• FREE TWO WAY BULLION TRADE
• PAPER BULLION REFORMS
• BANKING & FINANCE
• INFRASTRUCTURE UPGRADATION
• BULLION BANKING - REFORMS
• INTERNATIONAL BULLION EXCHANGE
B. N. VAIDYA & ASSOCIATES
FREE TWO WAY BULLION TRADE
• FREE IMPORTS OF BULLION AS IN ANY OTHER COMMODITY
• EXPORT OF BULLION
• ** ZERO IMPORT DUTY ***
B. N. VAIDYA & ASSOCIATES
PAPER BULLION REFORMS
• G.A.P.
• EXCHANGE TRADED FUNDS
• COLLECTIVE SAVINGS SCHEMS
• PAPER TRADING
B. N. VAIDYA & ASSOCIATES
BANKING & FINANCE
• Limits for Bullion Dealers / Jewellers
• Export Finance for Jewellers / Manufactures
• Supporting Industry
Brokers / Refining / Hallmarking .
B. N. VAIDYA & ASSOCIATES
INFRASTRUCTURE
• INSURANCE
• ASSAYING FACILITY
• TRANSPORTATION
• CUSTODIAN / DEPOSITORY SERVICE
• REFINING
• SUPPORT SERVICES
B. N. VAIDYA & ASSOCIATES
MATURED BULLION BANKING
• METAL ACCOUNTS
• MARGIN TRADING
• SPECULATIVE AND HEDGING ACCOUNTS
• BULLION AS A FINANCIAL PRODUCT
• TAPPING OF INDIA’S VAST BULLION RESOURCE
B. N. VAIDYA & ASSOCIATES
RETAIL BULLION BANKING
• GOLD ACCUMULATION PLAN / SAP
• GOLD - CERTIFICATES / GIFT VOUCHERS
• GOLD E-COMMERCE PRODUCTS
• GOLD DEBIT / CREDIT CARD
B. N. VAIDYA & ASSOCIATES
INTERNATIONALBULLION EXCHANGE
EXCHANGE TO TRADE• SPOT• FUTURES• OPTIONS• BULLION RELATED PRODUCTS
NO LOCAL TAXES
B. N. VAIDYA & ASSOCIATES
INTERNATIONAL INVESTOR / DEALER FRIENDLY
• EASY ACCESS
• TAX FRIENDLY
• TRANSPARENT
• MULTI CURRENCY SETTLEMENT
B. N. VAIDYA & ASSOCIATES
INTERNATIONAL METAL DEPOT
• Off shore vault for International exchange,
Associations & Banks
• Supply to Domestic Market
• Export to SAARC & Middle East
• Transfer of Stock between International
Bullion Houses.
B. N. VAIDYA & ASSOCIATES
IMPORTANCE OF GOLD IN INDIA
• Largest item in portfolio
(Rs.13,02,000+ Crores)
• Major forex asset
($ 280+ Billion)
• Liquidity
B. N. VAIDYA & ASSOCIATES
PRESENT BULLION PIPELINE Authorised Bank / Agency
|
Bullion Dealers (Large) __ __ __ __ | |
Bullion Dealers (Small) |
| | |
Jeweller | Jeweller | | |
Consumer / Investor Consumer / Investor
B. N. VAIDYA & ASSOCIATES
DIRECT INCENTIVE
ACTIVE ROLE BY
RESERVE BANK of INDIA
• Incentives for Gold Deposit Schemes & G.A.P.
• Support International Metal Depot
INCENTIVIES & TAX Sops for all players of Gold Deposit Schemes & G.A.P.
B. N. VAIDYA & ASSOCIATES
CONSTRAINTS
• CASH MANAGEMENT
• LOCAL TAXES COMPLEXITIES
• CONTROLS & SUPERVISION
• GOLD LOAN RISTRICTIONS
• REPUTATION IN EYES OF AUTHORITIES
B. N. VAIDYA & ASSOCIATES
CASH MANAGEMENT
• Handling Cash
• Cash Deposit with Banks
• Poor Banking System in Rural Area
• Difficulties in Easy Transfer of Funds
• Replacing Hawala – History
B. N. VAIDYA & ASSOCIATES
TAXES IN DOMESTIC TARIFF AREA
• State Levies : Salestax / VAT / Turnover tax / Surcharge Entry tax / Right to use Act- Tax / Stamp Duty
• Local Levies : Octroi / Cess
• Central Govt. Levies :
Custom Duty Income-tax/TDS SurchargeWith holding Tax / Central Sales Tax Stamp Duty / Excise
• CONTROLS & SUPERVISION
• Reserve Bank of India• Forward Market Commission – Consumer affairs Ministry• Customs/Financial Ministry• DGFT Commerce Ministry• State Government• Local authorities
B. N. VAIDYA & ASSOCIATES
CONTROLS & SUPERVISION
• Reserve Bank of India• Forward Market Commission – Consumer affairs
Ministry• Customs – Financial Ministry• DGFT - Commerce Ministry• S.E.B.I.• State Government• Local authorities
B. N. VAIDYA & ASSOCIATES
Advantages Of Gold Loan
• Free from Gold Price Risk
• Reduces Cost of Holding
• Jeweller to Profit from Design & Labour
B. N. VAIDYA & ASSOCIATES
REPUTATION
REPUTATION IN EYES OF
• AUTHORITIES
• CONSUMERS
• INTERNATIONAL DEALERS
B. N. VAIDYA & ASSOCIATES
RATIONALISATION
• Tax / Duty Rationalisation
• Reduction in Number of Agency Controlling
• Treat Gold as Currency so only one agency controls
• No Tax on Primary Gold
B. N. VAIDYA & ASSOCIATES
External Benefits
• L C Imports / Interest Arbitrage
• Export of Coins / Crude Jewellery
• Other Arbitrage