India is a key market for any type of gold business because we are the world's largest gold consumers. As a result, it comes as no surprise that the government has created a special savings account known as the Gold Monetization Scheme.
Additionally, India is the second-largest importer of gold. The implementation of the gold scheme will reduce the government's burden of bearing the cost of borrowing while also supplementing the RBI's gold reserves.
Let us learn more about this Savings Account Gold Monetization Scheme in this article.
The gold monetization scheme is a government initiative that encourages individuals, households, and institutions to deposit idle gold assets in recognized banks. Under the plan, deposited gold is put to constructive use by lending it to jewelers, while depositors earn interest on their gold holdings.
The initiative provides an appealing alternative to storing gold in lockers or safes, allowing individuals to earn returns on their gold investments without selling the precious metal.
The gold monetization initiative is open to all residents of India, including Hindu Undivided Families (HUFs), trusts, and charity institutions. Non-resident Indians (NRIs) are not eligible to join the scheme.
In addition to jewelry, coins, and bars, individuals can also deposit gold as jewelry, or in any other form they choose, subject to verification and testing by an accredited bank.
An eligible depositor can open a Gold Deposit Account with any recognized bank after satisfying the KYC requirements.
In general, deposits under the scheme must be made at the CPTC/GMS Mobilization, Collection, and Testing Agent (GMCTA), which will then test the purity of the customers' gold in their presence and issue deposit receipts for standard gold of 995 fineness to the depositor, as well as notify the customers' respective banks about the deposit's acceptance.
The designated bank will credit the customer's Short-Term Bank Deposit (STBD) or Medium/Long-Term Government Deposit (MLTGD) account, as applicable, either on the same day as the depositor receives the deposit receipt or within 30 days of the deposit of gold at CPTC/GMCTA (regardless of whether the depositor submits the receipt or not), whichever occurs first.
The interest on deposits will begin collecting on the day of the conversion of gold deposited into tradable gold bars or 30 days after receipt of gold at the CPTC/GMCTA, whichever comes first.
The gold monetization scheme provides two types of gold deposits: short-term bank deposits (STBD) and medium-long-term government deposits (MLTGDs).
|
Type of Scheme |
Tenor (in Years) |
|
Short Term Bank Deposit (STBD) |
1-3 |
|
Medium Term Government Deposit (MTGD) |
5-7 |
|
Long Term Government Deposit (LTGD) |
12-15 |
This deposit option allows individuals to deposit gold for a limited period, often one to three years. The gold deposited is used to meet the temporary gold needs of jewelers.
After the deposit period is over, depositors receive their gold in the form of gold bars or coins, as well as any interest that has accrued. Banks establish the interest rates for STBD, which may vary depending on the deposit duration.
This option allows individuals to deposit gold for a medium to long period, with maturities ranging from 5 to 7 years and 12 to 15 years. The gold deposited in MLTGD is used to address the country's internal gold needs, which include gold for jewelry and other purposes. The government fixes the interest rates for MLTGD, which are subject to periodic modifications.
The gold monetization scheme includes several appealing features that make it a profitable investment option for gold owners:
There are three ways to store gold: for one to three years, five to seven years, and twelve to fifteen years.
The interest rate on your deposit depends on the tenure.
If you get the payment on an annual basis, you will receive simple interest on your deposits (as of March 31).
If you receive it at maturity, the interest rate will be cumulative (compounded annually). When making a deposit, you must select a payment method.
You can only remove the actual gold you deposited if you are investing for the short term, in which case you have the option of withdrawing the gold or its worth in rupees at current prices.
Medium- and long-term deposits will only be paid in rupees at current prices, and you will be unable to withdraw your physical gold.
A gold monetization scheme has a number of benefits for both individual depositors and the broader economy. Among them are:
By directing idle gold into the financial system, the program makes better use of the country's gold resources and decreases dependency on imported gold.
With an increasing supply of domestically generated gold, the initiative helps lessen India's reliance on gold imports, which can benefit the country's trade balance.
Instead of storing gold in lockers, depositors can receive income from their gold holdings, thus putting their gold to work for them.
The gold deposited under the system is used to meet jewelers' gold demands, maintaining a consistent supply of gold for the jewelry sector.
Capital gains tax does not apply to earnings from the GMS plan. This is also extended if the investors' gold value rises, and there is no tax on interest gains.
GMS, a modification to the existing 'Gold Deposit Scheme' (GDS), is meant to mobilize gold owned by the country's households and institutions and promote its use for productive purposes, thereby reducing the country's dependency on gold imports.
The Gold Monetization Scheme, with its flexibility, safety, and tax benefits, provides an appealing option for gold owners to monetize their holdings while also contributing to the nation's economic progress.
The Scheme is available to all Scheduled Commercial Banks, excluding RRBs (Regional Rural Banks).
Yes, the gold monetization scheme is safe because it is supported by the Government of India. The initiative intends to channel the large amount of idle gold in households and institutions into the financial system. The deposited gold is used to meet the temporary gold demand of jewelers or the country's domestic gold requirements, ensuring that the gold is put to good use.
It is open to all Indian residents such as -
Other entities owned by the Central or State Government
To encourage even small deposits, the minimum deposit quantity is set at 10 grams.
No. Banks must, however, disclose implementation data to the RBI, including the names of the Collection and Purity Testing Centres (CPTCs) and refiners with whom they have entered into a tripartite arrangement, as well as the branches implementing the system. Banks must also report the total amount of gold mobilized under the initiative by all branches monthly in the appropriate format.
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