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Gold related schemes in India - Explained

Published on Sunday, November 15, 2015
In order to mobilise the idle gold of the country (estimated 20,000 tonnes) into productive usage, the government has come up with Gold related Schemes, which were stated in Union Budget 2015-16 by Finance Minister Arun Jaitley.

gold scheme



Prime Minister Narendra Modi has launched Three Gold related Schemes i.e.

  1. Gold Monetisation Scheme (GMS)
  2. Gold Sovereign Bond Scheme
  3. Gold Coin and Bullion Scheme
on 5th November, 2015 in New Delhi.  

Before discussing the schemes, let’s understand the meaning of Monetisation, as the basic purpose of these schemes is to monetise the gold.

Monetisation of Gold means to convert the country’s holding of gold into cash, to encourage the spending and investment capacity of the country and to reduce the import of gold.

Now let’s start learning about these schemes.

GOLD MONETISATION SCHEME

Under this scheme, the depositors need to open a metal deposit account with bank to place their idle gold holdings. The depositor will earn interest on its account. The jewellers can also obtain loans on their accounts. This scheme will help to monetise Rs. 60 lakh worthy gold, held by households and institutions in the country.

Objectives:

  • It will help in mobilising the idle gold of the country into productive use and also provide interest to its depositors
  • It will help in boosting the gems and jewellery sectors of the country as with the launch of this scheme, gold (raw material) will be available on loan from the banks
  • It will help to reduce the demand of import of gold.

Who can deposit under this scheme?

Indian Residents i.e.

a) Individuals

b) HUF

c) Trusts under Mutual funds/ Exchange Traded Funds registered under SEBI (Mutual Funds Regulations and Company)

DEPOSIT INTEREST


The depositor will have to deposit minimum raw gold equivalent to 30 grams of gold. There is no maximum limit of deposit. Raw gold can be in any form i.e. bars, coins or jewellery excluding stones and other metals)

The deposits will be accepted at Collection and Purify Testing Centres (CPTC) certified by Bureau of Indian Standards(BIS). The bank will issue the deposit certificates, after checking the purity of deposit, in equivalence to 995 fineness of gold.

The deposits can be of:
  • Short Term Bank Deposit (STBD) for 1-3 years
  • Medium (5-7 years) and Long Term (12-15 years) Government Deposit (MLTGD)
# Short term will be accepted by banks and Medium and Long Term will be accepted on behalf of the Government of India.

INTEREST

Short Term Bank Deposits
-          (Decided by banks)
Medium Term Bonds
2.25  %
Long Term Bonds
2.5 %

Interest will start accruing from:

EITHER
From the date, when the deposits will be converted into refined tradable bar

OR
After 30 days of the receipt of gold issued by CPTC or designated bank.
(Whichever is earlier)

OTHER FACTS

  • It will replace the existing Gold Deposit Scheme, 1999 and Gold Metal Scheme.
  • KYC rules are same as of any other deposit
  • Grievances will be handled firstly by Bank’s Redress Process and then by Reserve Bank of India.
  • The depositor can do redemption in either cash or gold form.

GOLD SOVEREIGN BOND SCHEME

Under this scheme, the government will issue Sovereign Gold Bonds, which will be sold through banks and designated Post Offices. These bonds will be issued by Reserve Bank of India on behalf of Government of India. These bonds are alternative financial asset for purchase of metal gold. It would help investors to invest in gold without buying physical gold.

The first tranche (specific class of bonds) will be accepted from 5 November, 2015 to 20 November, 2015 and binds will be issued on 26 November, 2015.

Who can buy these bonds?

Indian Residents i.e.

a) Individuals
b) HUF
c) Trusts
d) Universities
e) Charitable Institutes

KEY FACTS

  • Denomination of Bonds – 5, 10, 50 and 100 grams of gold (basic unit of 1 gram)
  • Minimum Investment – 2 units (2 grams of gold)
  • Maximum Investment (investment limit) – 500 gram per person per fiscal year (April – March)
  • Period of Bonds – 5 to 7 years
  • Interest on Bonds will be taxable (Income Tax and Capital Gain Tax)
  • Interest will be paid semi – annually on the initial value of investments of bonds at fixed rate of 2.75% per annum.
  • The investor will get redemption in rupees.

GOLD COIN AND BULLION SCHEME

Gold Monetisation Programme also includes Indian Gold coin and Bullion.

KEY FACTS

  • It is the first Indian minted gold coin, having National Emblem of Ashoka Chakra on one side and Mahatma Gandhi on other side.
  • Coin’s Denomination – 5 and 10 gram
  • Bullion – 20 gram
  • MMTC (Metals and Mineral Corporation of India) will make 15,000 coins of 5gm, 20,000 coins of 10 gm and 3750 of bullions of 20 gm available through its outlets. (24 karat purity and 999 fineness with hallmarked as per BIS Standards)

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