The government plans to make the certificates tradable in a bid to impart liquidity. The entire scheme will be operated through select public sector banks with countrywide networks of branches, possibly under the ambit of the Reserve Bank of India.

According to finance ministry officials, the attraction of the scheme is that it will not ask questions about the gold's origin and how it was purchased. There will be no tax liability on depositors.

North Block estimates that households have stashed around 13,000 tonnes of the yellow metal. The bulk of it is in jewellery, and thus cannot be tapped.

Bullion or "liquid gold" constitutes roughly 3,000 tonnes.The scheme's aim is to bring out a significant portion of the liquid gold and pump it into the economy. The deposits will go to shore up foreign-exchange and gold reserves of the country. The move will have a concommitant productive spinoff, say analysts as the gold will be freed from its current locked-up status. The interest rate of 2 to 3 per cent is the cost that will be borne by the government, an incentive that will have to be paid to dig out the reserve and channel it to productive streams.

The ministry is looking at ways of earning back the interest costs, and one of the options being considered is on-lending the gold in the international market.

North Block is also looking at another gold-linked scheme, which involves the delivery of a given quantity of gold at a pre-determined price after a pre-determined period against cash deposits. An underlying amnesty programme will be in operation in this scheme, as well. No questions are expected to be asked on the source of cash. There will be no taxliability either.

The only major hurdle is that investors will have to take the risk of gold price fluctuations at the time of delivery. Given limited analytical tools at the disposal of the investor, he is ill-equipped to arrive at the right price of gold at a future date. But North Block thinks that the `no-questions-asked' clause will be sufficient incentive for investors to put their money in the scheme. The price-fluctuation risk at the time of delivery can be smothered by the fact that the deposit instrument will have easy liquidity. The government is also contemplating providing continuous two-way, buy-sell quotes for the two instruments, so that easy liquidity is ensured.

The schemes have originally been thought out by the Reserve Bank. A report on them was prepared by a financial institution and submitted to the central bank for scrutiny. The report has been sent to the finance ministry for its approval.