Gold Monetization Scheme

Dear Readers,

Gold Monetization Scheme is one of the scheme that has been in news for quite a while. Our Union Minister of Finance stated in Union Budget 2015-2016 that India has approximately 20,000 tonnes of gold but that gold is neither traded nor monetised. Have you ever thought that a growing economy like India would need such a huge amount of gold and why not? If we are having such a huge reserve then why not make it flow in the veins of our economy. Yes friends, this scheme is all about that. Now let us discuss in detail:

The very first question that arises in our mind is that what is this Gold Monetization Scheme and what are its objectives?

Well, the answer lies in the name itself. Gold Monetization itself talk about converting the gold into money if we talk as a layman. It is a scheme that facilitates the depositors of gold to earn interest on their metal accounts. Once the gold is deposited in metal account, it will start earning interest on the same. The objectives of the Gold Monetization scheme are:

(i) To mobilize the gold held by households and institutions in the country.

(ii) To provide a fillip to the gems and jewellery sector in the country by making gold available as raw material on loan from the banks.

(iii) To be able to reduce reliance on import of gold over time to meet the domestic demand.

Opening of Gold Savings Account with the banks

When the customer produces the certificate of gold deposited at the Purity Testing Centre, the bank will in turn open a ‘Gold Savings Account’ for the customer and credit the ‘quantity’ of gold into the customer’s account. Simultaneously, the Purity Verification Centre will also inform the bank about the deposit made.

Interest payment by banks:

The bank will commit to paying an interest to the customer which will be payable after 30/60 days of opening of the Gold Savings Account. The amount of interest rate to be given is proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors of gold, will be ‘valued’ in gold. For example if a customer deposits 100 gms of gold and gets 1 per cent

interest, then, on maturity he has a credit of 101 gms.

Redemption:

The customer will have the option of redemption either in cash or in gold, which will have to be exercised in the beginning itself (that is, at the time of making the deposit).

The tenure of the deposit will be minimum 1 year and with a roll out in multiples of one year. Like a fixed deposit, breaking of lock-in period will be allowed.

Tax Exemption:

In the Gold Deposit Scheme (1999), the customers received exemption from Capital Gains Tax, Wealth tax and Income Tax. Similar tax exemptions are likely to be made available to the customers in the GMS after due examination.

Utilization of Deposited Gold

To incentivize banks, it is proposed that they may be permitted to deposit the mobilized gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination.

Foreign Currency:

Banks may sell the gold to generate foreign currency. The foreign currency thus generated can then be used for onward lending to exporters / importers.

Bank may convert mobilized gold into coins for onward sale to their customers

Exchanges:

Banks to buy and sell on domestic commodity exchanges, where mobilized gold can be delivered.

Lending to jewellers:

For lending to jewellers

MoU between Banks, Refiners and Purity Testing Centres

1. The banks will enter into a tripartite MoU with refiners and purity testing centres, that are selected by them to be their partners in the scheme.
2. The MoU will clearly lay down the details regarding payment of fee, services to be provided, standards of service and the details of the arrangements between the banks, refiners and purity testing centres.

-Source, mygov.in

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