Gold Monetization Scheme

Objec­tive:

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.

Tanure:

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.

Ben­e­fit: 

1) 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.

2) Inter­est in Gold: 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.

Gold Monetization Scheme

Lend­ing the Gold to the Jewellers

Gold Loan Account: The jew­ellers, on the basis of the terms and con­di­tions of the banks, will get a Gold Loan Account opened at the bank.

Deliv­ery of gold to jew­ellers: When a gold loan is sanc­tioned, the jew­ellers will receive phys­i­cal deliv­ery of gold from the refin­ers. The banks will in turn make the req­ui­site entry in the jew­ellers’ Gold Loan Account.

Inter­est received by banks: Inter­est rate paid to the depos­i­tors of gold The inter­est rate charged by the banks will have to cov­er the following:

  • Fee paid to the refin­ers and Puri­ty Ver­i­fi­ca­tion Centres.
  • Prof­it mar­gin of the banks
  • The banks can direct­ly get gold from the inter­na­tion­al mar­ket on a con­sign­ment basis and lend it to the jew­ellers. If this route is more lucra­tive, then the entire pur­pose will get defeat­ed. Thus, this aspect will also have to be kept in mind, while decid­ing the inter­est rate.

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