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Aug 242019
 

Gold Monetisation Scheme [How does gold Monetisation scheme work?

According to Indian traditions, gold is an auspicious metal. People purchase gold during special occasions. Gold ornaments not only increase the physical beauty but also add to the social status of the person. But most people do not use heavy gold ornaments regularly. These items are stored in the safety vaults at homes or in the bank accounts. So, people cannot use it as a valuable exchange item in the times of financial requirements. The central government, along with the RBI designed and developed a new scheme and named it Gold Monetisation Scheme. The scheme details suggest that people can deposit their gold ornaments in special accounts, and earn an interest on the total valuation.

Name of the scheme Gold Monetisation Scheme or GMS
Launched in India
Launched by Narendra Modi
Date of announcement 2015
                    Target beneficiaries                    Indian citizens
Supervised by Central government and RBI

 

Key benefits of the scheme

  1. Mobilizing gold – Massive amounts of gold bars and ornaments are trapped in the trust funds, institutional vaults and in the residential lockers of the common people. The aim of the central government is to mobilize the gold and bring it in the mainstream financial market. It will add value to the jewelry industry that generates high revenue for the country. Gold mobilization will increase the overall GDP of the country as well.
  2. Goal set by the government – The PM announced that the only purpose of this scheme is to get access to nearly 25000 tonnes of this precious metal that lie locked in the vaults, and mobilize it in the financial sector by the end of 2018 – 2019.
  3. Acquiring interest – Keeping gold either at home or in the bank lockers do nothing to increase the income of the gold owner. By depositing gold under this unique scheme, depositors can pave the path for additional income in the form of interest on the gold valuation.
  4. Increased security for the ornaments – People who do not have access to bank lockers are in risk of losing their valuable ornaments in case of a home robbery. The scheme offers depositors freedom from this worry. Their gold will be kept in the bank vaults, safe and sound.
  5. Tax benefits – It is a good way for the Indian citizens to save money. The amount that the depositors get will not be subjected to any taxation. It will be kept outside categories such as the income tax, capital gains tax, and wealth tax.
  6. Redemption flexibility – The gold depositor can redeem the deposited gold at the end of the specified tenure. He/she can either accept cash or get the equal amount of gold. However, this redemption preference must be stated clearly in the application form during registration.
  7. Current interest rate – Though the interest percentage, promised as per the scheme can change as per the market fluctuations, the current interest rate that depositors can get on an annual basis, ranges between 2.25% and 2.50%.
  8. Less gold imports – To meet the national requirements, the Indian government needs to import gold from other countries at high rates. The success of this gold deposit scheme will put a stopper to this. So, the Indian government will be able to save substantial amounts, and use the money for the development of the country.
  9. Types of GMS – As per the scheme details, the central government and the RBI policy makers divided the scheme in three different categories. It makes it easy for people from all financial groups to get the benefits. You can deposit your gold in the Short Term Gold Deposit (STGD) scheme, Medium Term Gold Deposit (MTGD) scheme or the Long Term Gold Deposit (LTGD) scheme.
  10. Nominee facility – If an individual is opening a GMS account under his/her name, then he/she will get the opportunity to select a nominee. In the absence of the person, the nominee can redeem the gold.

Details of the various schemes

Details Span of deposition Minimum gold deposited Maximum gold deposited Rate of interest Minimum lock-in time Holder of the gold deposit
STGD

 

1 to 3 years 30 grams No upper limit To be decided by the bank To be decided by the bank Respective bank
MTGD 5 to 7 years 30 grams No upper limit 2.25% per year 3 years Bank on behalf of the government
LTGD 12 to 15 years 30 grams No upper limit 2.50% per year 5 years Bank on behalf of the government

 Eligibility and necessary documents for application

  1. Depositor must be the owner – Only the owner of the gold or the rightful heir of the owner can get the benefits of the scheme. In case the original owner is dead, the rightful heir must produce the death certificate.
  2. Must be an Indian citizen – If any individual wants to deposit gold and get the benefits of this scheme, then he/she must be an Indian citizen and should reside in any state permanently.
  3. ID and address proof – Copies of Aadhar card and residential proof documents must be produced during registration.
  4. Registered trusts can participate – Some trust funds like the Mutual Funds or Exchange Traded Funds can also become registered depositors. It is compulsory for these rust funds to abide by the rules, which have been highlighted by SEBI.
  5. Charitable organizations can participate – Now, the scheme is also open to charitable organizations. It is mandatory for these organization to be registered, and must possess such documents to support their claims.
  6. Single owner or partnership firms can apply – If any single ownership company or a partnership organization has access to sufficient gold, then the scheme will allow the participation of such companies. They owner/owners must show proper registration documents and permits for successfully applying for the scheme.

How to deposit gold under the GMS?

  1. RBI has announced that eligible candidates can get this facility at all banks.
  2. The interested applicant must go to the nearest bank and ask for the details of the Gold Monitisation Scheme account.
  3. The depositor must bring the gold that he/she wishes to deposit under the scheme.
  4. The bank executive will accompany the candidate to the Collection and Purity Testing Centre.
  5. The gold will be tested for purity and an account will be opened in the name of the depositor.
  6. The deposited gold will then be sent to secure facility, where it will be purified and transformed in gold bars.
  7. These bars can be used for trade in the financial sector.
  8. Once this process is complete, the depositor will start getting the interest in his/her gold deposit account.

The scheme is relatively new, and the government has only started promoting it vigorously to attract interested applicants. In future, the RBI and central government can bring about new changes in the scheme to make it more lucrative for the people and depositors. Till date, only a few groups can deposit gold in the GMS, and attain the benefits. In time, the government can pave the path for the inclusion of other groups as well. We will continuously upload new details about this scheme as soon as the government makes an official announcement.

 

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