The Centre unveiled a scheme on Tuesday to get people to deposit their idle gold holdings with banks and earn interest. The stock of gold that is neither traded nor monetised — that is, lying in lockers — is estimated to be over 20,000 tonnes. Indians are also one of the largest consumers of gold in the world and the country imports up to 1,000 tonnes a year.
As per the draft of the scheme put out by the Finance Ministry, an individual can deposit as little as 30 gm of gold and earn interest and also get tax benefits. The ministry has invited public comments on the scheme.
The scheme, a Budget announcement, aims to replace both the Gold Deposit and Gold Metal Loan Schemes. The Gold Deposit scheme was introduced in 1999 to mobilise gold idling in lockers and put it to productive use. But the scheme did not meet with much success, with less than 10 tonnes collected. The key reasons for this disappointing performance were the low interest rate and the long process for issuance of a certificate.
The government has tried to make the new scheme more appealing. Besides the low minimum deposit quantity of 30 gm aimed at attracting even small depositors, the draft says that “the gold can be in any form — bullion or jewellery.”
Depositors will have the option of taking cash or gold at the time of maturity. The minimum tenure of the account will be one year with an option of rolling over in multiples of one year. According to the draft scheme, exemptions from Capital Gains Tax, Wealth Tax, and Income Tax are likely to be made available after “due examination”.
How it works The draft prescribes the process for participating in the scheme. Interested customers need to get their gold certified for purity at one of the 350 Hallmarking Centres across the country. These centres will weigh, melt, verify the purity of the gold offered and issue a certificate within five hours against 90 days now.
The charges for this service will be borne by the bank where a deposit is being made. But if a customer is not making a deposit of the gold and taking it back in the form of bars, he will have to pay the Hallmarking Centre.
Post deposit, the customer will be issued a certificate based on which the bank will open a Gold Savings Account. The interest, to be decided by banks individually, will be payable after 30/60 days of the opening of the account.
Now, SBI offers interest of 0.75 per cent per annum for a three-year gold deposit and 1 per cent annually for four- and five-year deposits. If banks offer interest rates higher than this, the gold monetisation scheme may find more takers, say analysts.
Both the principal and the interest will be valued in gold. For example, if a customer deposits 100 gm of gold and gets 1 per cent of interest, then, on maturity, he has to his credit 101 gm of gold.
For jewellers The scheme will also allow jewellers to obtain loans in their metal account. It has been proposed to allow banks to lend the gold they collect under this scheme to jewellers. This will help meet some of the demand of the jewellery industry. This will also help reduce the reliance of jewellers on imports. But analysts say banks need to make this loan more attractive than the schemes now available to make it appealing to jewellers.
‘Practical approach’ Commenting on the draft, Somasundaram PR, Managing Director (India), World Gold Council, said that both directionally and in terms of content, this draft reflects a practical approach.
“Once the incentive framework falls into place to the satisfaction of banks, customers and others, we will own a ‘Uniquely Indian’ scheme that allows gold to become a dynamic, fungible asset in the hands of gold savers, with significant benefits to the economy,” he said.
With inputs from Rajalakshmi Nirmal, BL Research Bureau