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Government modifies gold monetisation scheme

The government has modified the gold monetisation scheme (GMS) after the Reserve Bank of India (RBI) issued a master direction on the scheme on January 21.

What is Gold Monetisation Scheme (GMS) with modified changes?

1.It replaces the existing Gold Deposit Scheme, 1999.

2.The deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them.

3.Any Resident Indians can make deposits under the scheme.

4. The minimum deposit at any one time shall be raw gold  equivalent to 30 grams of gold.

5.There is no maximum limit for deposit under the scheme.(Amended :The quantity of gold collected under the scheme will be expressed up to three decimals of a gram)

6.The gold will be accepted at the Collection and Purity Testing Centres (CPTC) .(Amended:Gold depositors can also give their gold directly to the refiner rather than only through the Collection and Purity Testing Centres (CPTCs)

7.The deposit certificates will be issued by banks in equivalent  of 995 fineness of gold.(Amended:Gold to be deposited with the CPTCs/Refineries can be of any purity)

8.The designated banks will accept gold deposits under

  • The Short Term (1-3 years) Bank Deposit (STBD)

  • Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes (MLTGD).

9.The The Short Term  Bank Deposit (STBD) will be accepted by banks on their own account.(Amended: Banks are free to hedge their positions in the case of short-term deposits)

10.The Medium  and Long Term Government Deposit Schemes will be accepted on behalf of the Government of India.(Amended: Premature redemption under Any Medium Term Deposit will be allowed to be withdrawn after 3 years and any Long Term Deposit after 5 years)

11.There will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks for the STBD.

12.The interest rate  in the STBD will be determined by the banks.

13.The interest rate in the medium term bonds has been fixed at 2.25% and for the long term bonds is 2.5% for the bonds issued in 2015-16.

14.The designated banks may sell or lend the gold accepted under STBD to MMTC for minting India Gold Coins (IGC) and to jewellers, or sell it to other designated banks participating in GMS.

15.The gold deposited under MLTGD will be auctioned by MMTC or any other agency authorised by the Central Government and the sale proceeds credited to the Central Government’s account with the Reserve Bank of India.

16.Earnings are exempt from capital gains tax, wealth tax and income tax. There will be no capital gains tax on the appreciation in the value of gold deposited, or on the interest you make from it.

WHAT WILL THE BANKS DO WITH THE GOLD?

The designated banks may sell or lend the gold accepted under the short-term bank deposit to MMTC for minting India Gold Coins and to jewellers, or sell it to other designated banks participating in the scheme.( Amended :banks would be getting a 2.5 % commission for the scheme which will include the charges payable to the Collection and Purity Testing Centres/Refiners)

Other Modifications :

Bureau of Indian Standards (BIS) has modified the licensing condition for refiners already having National Accreditation Board for Testing and Calibration Laboratories (NABL) accreditation from the existing three years refining experience to one year refining experience.

Impacts of the amendments :

  • It will be subject to a reduction in the interest payable.

  • This will encourage the bulk depositors including Institutions to participate in the scheme.

  • This is likely to increase the number of licensed refiners.

  • This will give the consumer better value for the gold deposited.

  • It is expected that the modifications will make the scheme more attractive for potential depositors.

Benefits:

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