Topics related to the newly introduced Gold Monetization Schemes have been frequently asked in Group Discussions and Personal Interviews of SBI PO exams. Here is everything you need to know about the topic :
India is among the top two markets for gold with the demand for bars and coins estimated at 300 tonnes annually as households have traditionally seen it as a safe investment. But the high demand and large quantities of imports distort the trade numbers and put pressure on the current account deficit and, in adverse situations, impacts the exchange rate.
The government on 9th September 2015, approved introduction of Gold Monetization Schemes released its ambitious gold monetization scheme that aims to cut down gold imports in the country. Gold Deposit Scheme (GDS) is in the nature of a fixed deposit in gold. The customers can deposit their idle gold under GDS which will provide them safety, interest earnings, tax benefits and a lot more. The scheme will initially be launched at a few places because the government will have to first set-up infrastructure for facilitating easy and secure handling of gold.
Purpose of the Scheme
To mobilize the idle gold in the country and put it into productive use.
To provide the customers an opportunity to earn interest income on their idle gold holdings.
How the Scheme Works
Eligibility for the scheme is of any Resident Indian of the following categories – individuals, singly or jointly (as Former or Survivor), HUFs, Trusts, Companies.
Minimum Quantity of deposit is 30 gms (gross) (No upper limit for deposit)
Period of deposit is 3 years,4 years or 5 years
Rate of Interest & Payment: The current interest rates w. e f. 01.09.2010 are: 0.75% p.a. for 3 years, 1.00% for 4 years and 1.00% for 5 years. Interest is calculated in Gold currency (XAU) and paid in equivalent rupees. Interest rate is subject to change and option for Interest Payment are Non-Cumulative (on 31st March) every year or Cumulative (On Maturity).
Gold bonds will be issued in denominations of 5, 10, 50, 100 grams of gold.
Those willing to deposit the gold will be given a certificate mentioning the amount and purity of the deposited gold. Banks will open a ‘Gold Savings Account’ on the basis of such certificates.
Loan facility: Rupee loans available at any branch of SBI up to 75% of the notional value of gold.
Benefits of the Scheme (for the country and individual citizens)
The scheme is meant to mobilize gold held by domestic households and institutions. Gold collected through the scheme will be made available to jewellers for manufacturing of new jewellery and other items. The scheme is meant to mobilize gold held by domestic households and institutions. Gold collected through the scheme will be made available to jewellers for manufacturing of new jewellery and other items.
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 gold monetization scheme will enable depositors to earn interest on their on their gold accounts. Under this scheme, the minimum quantity of gold that has to be deposited is at 30 grams
Tax benefits: Gold savings account will be exempt from capital gains tax, wealth tax and income tax.
The gold monetization scheme will cut down on imports, thus reducing foreign exchange outflows. According to estimates, India paid $34.32 billion to import around 930 tonnes of gold in the year ending March 2015.
Gold monetization scheme, in long term, will reduce country’s reliance on the import of gold and put it to productive use, the government said.
Though stocks of gold in India are estimated to be over 20,000 tonnes, most of this gold is neither traded, nor monetized. Gold collected through the scheme will be made available to jewelers for manufacturing of new jewellery and other items.