It's been over two years that the State Bank of India (SBI) launched an ambitious gold scheme for the non-resident Indians (NRIs). The bank officials call it a fairly successful scheme, but the gold sale figures show that NRIs are not overly enthused.

According to SBI officials, around 150 kg of gold have been sold in the New Delhi main branch since the scheme began in November 1994. So over a period of 30 months, the average works out to 5 kg per month, which is 50 per cent of the buying limit of any single NRI.

As only the SBI main branches in Delhi and Trivandrum are delivering gold at present, under this scheme, these figures indicate that only a small percentage of the NRIs coming into the country are keen to buy gold via this route.

Let's look at the scheme, the way it is, to find out the reasons behind its not so great performance.

Under this plan, any NRI, who's stayed away from the country for more than six months, is eligible to buy gold at international rates. That is, an NRI fulfilling the custom requirements at the airport of entry in India can declare his intention to buy up to 10 kg of gold at the international quoted rates. The prospective buyer is required to fill up the declaration-cum-Ex. bond bill of entry form (in four copies) and submit the same to the custom officials. The officers verify and confirm the eligibility, and assess the duty payable on the quantity of gold that is intended to be purchased.

Then three copies of that form are returned to the buyer and one retained by the custom people.

The next stage is that of depositing the custom duty (Rs 220 per 10 gm) in foreign currency at the airport SBI counter. The air customs superintendent, after being satisfied that the NRI is eligible to import gold and that the duty has been correctly assessed and paid, signs the ``out of the customs charge'' on the original and duplicate copies of the bill of entry form. Finally one's ready to purchase international quality gold at the SBI counters, either at main branch in New Delhi or Trivandrum. The sale is effected at the price quoted in US dollar.

But payment in convertible foreign exchange in the form of draft, traveller cheques, currency notes and through NRI accounts will be accepted. The dollar draft must be drawn in favour of SBI, New Delhi Main Branch, and payable at SBI, New York. The delivery takes about seven days from the date of depositing the custom duty. SBI officials explain the plus points of this scheme. First, this gold is available at competitive international rates.

Also, from the security point of view, it's convenient for the NRIs to buy gold at the Indian airports, rather than carrying it all the way from abroad, they say.

But gold experts point out the loopholes surrounding the scheme. Krishan Goyal, general secretary, Bullion Merchants Association, says that although it's quite useful, the related hassles have made it an unfriendly product. While agreeing that buying gold at international prices in India saves one the trouble of carrying it across the world, he says that it's too much of a trouble for the rich NRIs to be queueing up for so many clearances to buy gold. And the not-so-rich NRIs don't buy it wondering where to invest the proceeds, once they sell this gold in India. Then there are obstacles from the custom authorities for carrying foreign exchange, Goyal adds, even if that foreign exchange is for paying the duty on gold. Suggesting that the fault lies in implementation of the scheme, Goyal stresses that to begin with NRIs should be drawn into it by making it a single-window clearance system. A wider network of the bank for this purpose is important too.

Also, a government debate with the bullion dealers will be able to devise many a steps to attract NRI funds, says Goyal. For instance, link up the NRI gold scheme with housing plans and subsidies, etc. Goyal's advice seems to be: Encourage NRIs to get foreign exchange for India, don't try their patience.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.