NEW DELHI(BullionStreet): After India allowed storing a portion of gold stocks under Gold ETF's in banks, these gold could partially meet the requirements of the gems and jewelry trade in the country, according to a top official.

Arvind Mayaram, Secretary, Ministry of Finance said the primary objective of the new move is to unfreeze or release a part of the gold physically held by mutual funds under gold ETFs and enable them to deposit the gold with banks under the Gold Deposit Scheme.

However, many fund managers said linking Gold ETFs with deposit schemes may not make any significant difference as the interest offered by banks on gold deposits is low.

India last week allowed a part of the gold physically held by mutual funds under gold ETFs to be deposited in banks.

The release further stated that apart from gold ETFs, the changes proposed to the Gold Deposit Scheme will make it attractive for individuals to deposit their idle gold with the banks under the Gold Deposit Scheme.

The minimum quantity of gold that may be deposited will be reduced and the minimum tenure of deposit will be reduced to six months (from the present stipulation of three years).

Banks have been advised to notify the changes in the Gold Deposit Scheme. AMCs are supposed to buy gold equivalent to total investment under gold ETF and keep it in a vault.

According to AMC officials, the fund houses would be permitted to keep up to 20 percent of the underlying gold for their gold ETFs (Exchange Traded Funds) in banks’ gold deposit schemes.

According to industry officials, SEBI will announce the necessary norms for the gold ETF following the Finance Ministry’s announcement on Monday.