Union Cabinet approved introduction of Gold Monetization Schemes
Under this initiative, revamped Gold Deposit Scheme (GDS) and the Gold Metal Loan (GML) Scheme will be implemented by the Union Government.
The Union Cabinet on 9 September 2015 approved introduction of Gold Monetization Schemes that were announced by the Union Finance Minister Arun Jaitley in his 2015-16 budget speech.
Under this initiative, revamped Gold Deposit Scheme (GDS) and the Gold Metal Loan (GML) Scheme will be implemented.These revamped schemes are in addition to the Sovereign Gold Bond Scheme as approved by the Cabinet.
Revamped Gold Deposit Scheme
• To mobilize the gold held by households and institutions in the country.
• To provide a fillip to the gems and jewellery sector in the country by making gold available as raw material on loan from banks.
• To reduce reliance on import of gold to meet the domestic demand.
Process of Gold Monetization by customers/Gold Mobilisation by Banks
Stage1: Customer willing to monetize gold, which is in the form of bullion or jewellary, will approach Purity Testing Centre (PTC). In a PTC, a preliminary XRF machine-test (Preliminary Test) will be conducted to assess the approximate amount of pure gold.
The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams and around 350 Hallmarking Centres that are certified by the Bureau of Indian Standards (BIS) will act as PTCs to test the gold.
Stage2: After the preliminary assessment, if the customer gives his consent for melting the gold, a further test of purity (Fire Assay Test) will be conducted at the same PTC. The test will melt the gold and net weight of gold will be estimated.
Stage3: After the result of the Fire Assay Test, if the customer willing to deposit the gold he will be given a certificate by the collection centre certifying the amount and purity of the deposited gold; Otherwise he can take back the melted gold in the form of gold bars after paying a nominal fee.
Stage4: The depositor produces the certificate at the bank and the bank in turn will open a Gold Savings Account for the depositor and credit the quantity of gold into the depositor’s account. Simultaneously, the PTC will also inform the bank about the deposit made.
Stage5: The bank will pay interest to the depositor after 30/60 days of opening of the account. The amount of interest rate to be given is proposed to be left to the banks todecide.
Both principal and interest to be paid to the depositors 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.
The deposits can be made for a short-term period of 1-3 years (with a roll out in multiples of one year); a medium-term period of 5-7 years and a long-term period, of 12-15 years (as decided from time to time).
The depositor will have the option of redemption either in cash or in gold, which will have to be exercised at the time of deposit.
Similar to the Gold Deposit Scheme (1999), in which the customers received Capital Gains Tax, Wealth tax and Income Tax exemptions, the depositors of GMS also will receive similar benefits.
Gold Reserve Fund: The difference between the current borrowing cost for the Government and the interest rate paid by the Government under the medium/long term deposit will be credited to the Gold Reserve Fund.
The deposits will be utilized for Auctioning, Replenishment of RBIs Gold Reserves, Coins and lending to jewelers.
To make the process of lending to jewelers smooth and efficient, jewellers will be allowed to open Gold Loan Account as part of the revamped Gold Metal Loan Scheme.
For implementation of these revamped schemes, the banks will enter into a tripartite Memorandum of Understanding (MoU) with refiners and PTCs.
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