The Union Ministry of Finance on 19 May 2015 released the draft outline of Gold Monetization Scheme (GMS).
The Ministry prepared the draft after due deliberations and consultations with various stakeholders which includes banks, refineries, hallmarking centres, jewellers’ associations, Reserve Bank of India (RBI) and various government departments.
The Ministry has sought comments from stakeholders by 2 June 2015.
Features of Gold Monetization Scheme (GMS)
• 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.
Since the implementation of the scheme requires a vast set-up of infrastructure for facilitating easy and secure handling of gold, it will be initially launched only in selected cities and over time, as the infrastructure for assaying and refining of gold develops, will be extended to other cities.
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 to decide.
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 tenure of deposit will be a minimum period of 1 year and with a roll out in multiples of one year. 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 after due examination.
Utilisation of Mobilised Gold by Banks
PTC will send the gold to the refiners. The refiners will keep the gold in their ware-houses, unless the banks prefer to hold it themselves. The refiners will be paid a fee by the banks, as decided by them, mutually.
The banks will also be permitted to exercise following options regarding utilization of gold it collected from the depositors.
a) Deposit the mobilized gold as part of their Cash Reserve Ratio (CRR)/ Statutory Liquidity Ratio (SLR) requirements with RBI.
b) Sell the gold to generate foreign currency which can then be used for onward lending to exporters or importers.
c) Convert mobilized gold into coins for onward sale to their customers.
d) Can buy and sell on domestic commodity exchanges, where mobilized gold can be delivered.
e) Can lend to jewellers upon opening of Gold Loan Account for this purpose with the banks.
For implementation of the scheme, the banks will enter into a tripartite Memorandum of Understanding (MoU) with refiners and PTCs that are selected by them to be their partners in the scheme.
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When: 19 May 2015