Gold Monetisation Scheme, The Indian government introduced the Gold Monetisation Scheme (GMS) in September 2015. The government launched the gold monetisation scheme to address the problem of gold being stored in bank lockers and start making money from the gold stock. Through the GMS, people and groups can profit from their gold deposits. Redesigned and integrated into the GMS, the gold monetisation plan consists of the former “Gold Deposit Scheme” and the “Gold Metal Loan” scheme. By mobilising gold held by households or institutions and facilitating its use for economic purposes, the GMS seeks to lessen the nation’s long-term need for gold imports.
Because it protects the gold, investing in GMS is a wise choice for both individuals and organisations. The money received is deposited by the GMS into bank lockers, which house the gold for security purposes, much like a savings bank account. An individual or organisation may choose to put gold into a gold savings account and receive interest under the GMS. However, it should be noted that jewellery made of gold, stones, or other metals cannot be stored.
Contents
What is the Gold Monetisation Scheme?
The Indian government launched the Gold Monetisation Scheme (GMS). Its goal is to make the nation’s gold reserves, which belong to both individuals and organisations, available for use for advantageous ends. Established in 2015, the Reserve Bank of India (RBI) is in charge of overseeing the program.
Key Highlights of the Gold Monetisation Scheme
| Key Facts of the Gold Monetisation Scheme | |
| When was it launched? | November 2015 |
| It is implemented by which ministry? | Ministry of Finance |
| Who launched the Scheme? | It was launched by the then Minister of Finance, Late Shri Arun Jaitley. |
| What is the objective of the Scheme? | To mobilize the gold lying idle with the citizens of the country and thus ensure its economic mobilisation. |
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Objectives of the Gold Monetisation Scheme in India
The gold monetisation scheme’s (GMS) goals are:
- Bringing idle wealth from Indian households and establishments into the productive financial system is the purpose of the GMS.
- India is the largest importer of gold in the world. The GMS seeks to reduce this dependence. in preference to selling their gold, it encourages humans to deposit it with banks and different monetary institutions.
- Even those with significantly lower incomes can easily spend money on the gold route to the GMS. This is due to the possibility of depositing tiny quantities of gold and creating a hobby.
- The GMS provides support to the gold and jewellery sectors. It provides banks and other economic organisations with a consistent supply of gold. Customers may pay less for gold as a result. It supports the expansion of the jewellery and gold sectors.
Features of the Gold Monetisation Scheme
The following are the Gold Monetisation Scheme’s salient features:
- Deposit choices come in two varieties: long-term deposits, which last five to fifteen years, and short-term deposits, which last one to three years. This gives depositors the freedom to suit their demands.
- There are several ways to deposit the gold under the plan. This makes it more convenient for depositors by including items like jewellery, coins, and bars.
- The London Bullion Market Association (LBMA) sets live international prices for the value of the deposited gold. For depositors, this guarantees fair pricing.
- The software needs information on the gold that needs to be deposited, as well as Aadhar and PAN cards. There aren’t many formalities.
- The scheme offers attractive interest rates on deposits. The short-term deposit rate is 2.5%, while the long-term deposit rate is 3%. Income tax is due on the interest income.
- Refineries and partner banks hold the deposited gold to ensure security.
- Participating banks offer loans to individuals up to 75% of the value of the gold they have deposited.
- The nature of the deposits is liquid. After certain lock-in periods for certain programs, depositors are able to withdraw their gold.
Eligibility for the Gold Monetisation Scheme
- Participants in the Gold Monetisation Scheme must be Indian citizens. This covers Hindu Undivided Families (HUFs), individuals, and trusts.
- Certain deposit programs offered by the Gold Monetisation Scheme are also open to non-resident Indians (NRIs).
- Anyone over the age of eighteen may open a Gold Savings Account. The maximum age is not specified.
- Only Sovereign Gold Bonds with a tenor of five to seven years are eligible for deposits from NRIs under the Gold Monetisation Scheme.
- In order to be covered by the plan, the depositor must submit KYC documentation, a PAN card, and details regarding the guaranteed gold. Coins, bars, and jewellery are all made of gold.
- Trusts and HUFs can also participate in the Gold Monetisation program.
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Gold Monetisation Scheme Benefits
The Gold Monetisation Scheme’s main advantages are:
- Through the method, people can make money off of their idle gold assets. They might receive income from the gold they put in different accounts. This unlocks the economic potential of gold.
- According to income tax regulations, deposits made under the plan are subject to a fixed rate of interest.
- varying deposit choices have varying interest rates.
- Interest rates range from about 2.5% p.a. for short-term deposits to up to 3% p.a. for long-term deposits.
- Depositors may borrow up to 75% of the invested gold’s value.
- The London Bullion Market Association (LBMA) sets live international prices for the value of the deposited gold. For depositors, this guarantees fair pricing.
- Refineries and banks keep the deposited gold in high-security vaults. Following a predetermined lock-in period, depositors have the option to prematurely remove their gold investments.
- The method states that a minimal number of KYC documents are required. To promote broader participation, other processes are simplified.
- Capital gains from early withdrawals can benefit from indexation.
Challenges faced in implementing the Gold Monetisation Scheme
Feelings of attachment:
- The majority of gold held by households has a conventional attachment value.
- As a high degree of distinction, it has religious ritual significance.
- Examples of legacy themes include gold being passed down from one generation to the next and a daughter getting married.
Source of unreported income:
- A household should be cautious of tax inspections if they do not have purchase receipts.
Reduced interest rates under the scheme:
- The low interest rates are deterring investors from making investments. The schemes have a maturity period. It is believed that gold is convertible into cash and can be traded.
Certification:
- In India, only a few jewellers outside of the larger cities provide certifications.
- Depositing these refined gold products will drastically lower the quality of the gold that depositors already own.
Awareness:
- Not enough people are aware of the above-mentioned benefits of the strategy to draw their attention.
- The banks are not doing enough to promote the idea.
What is the difference between a Gold Monetisation Scheme Program and a Sovereign Gold Bond?
- By depositing at least 30 grammes of gold in jewellery or bullion in a bank account for a year, residents can receive tax-free interest under the Gold Monetisation Scheme.
- The Sovereign Bond Scheme allows for the issuance of gold bonds denominated in rupees in quantities of 5, 10, 50, and 100 grams.
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Conclusion
- NITI Aayog is seeking recommendations to improve this scheme’s efficacy.
- One idea is that since jewellers have greater trust in the public, the government should collaborate with them.
- Gold deposits can only be collected by banks and jewellers that have earned BIS certification.
- People who live in cities spend more money on gold. Making them aware of the plans is necessary to increase their interest in the project.
- The three main reasons to buy gold are security, liquidity, and capital gains.
- To improve the scheme’s implementation, officials must address the aforementioned problems and difficulties.
Faq’s
Q. When was the Gold Monetisation Scheme first implemented?
Ans: In 2015, the Gold Monetisation Plan was debuted.
Q. Which ministry oversees the implementation of the Gold Monetisation Scheme?
Ans: The Ministry of Finance is responsible for implementing the Gold Monetisation Scheme.
Q. What are some of this scheme’s goals?
Ans: The goal is to reduce import costs and India’s dependency on foreign gold while making the most of the gold that is lying around in homes and businesses.
Q. What is this scheme’s current threshold limit?
Ans: Ten grams of gold is the current limit under this system.
Q. What is the name of the Gold Monetisation Scheme-like scheme?
Ans: The Sovereign Gold Bond Scheme is a program that is similar to the Gold Monetisation Scheme.
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