Gold & Silver

Gold deposit scheme may fetch 1.5% interest and monetisation plan 2.5%

Shishir Sinha New Delhi | Updated on January 24, 2018

More sheen: The schemes are expected to bring out over 20,000 tonnesof gold lying idle with households and reduce imports

Cabinet to take a decision soon on gold deposits

The proposed Gold Deposit Scheme may fetch you a minimum interest of 1.5 per cent, while the Gold Monetisation Scheme could earn a flat 2.5 per cent interest rate annually. A decision on the two schemes is expected to be taken by the Cabinet shortly.

The schemes are expected to bring out over 20,000 tonnes of gold lying idle with households and reduce dependency on imports.

Small investors

The Gold Deposit Scheme will be mainly for small investors. One can deposit bullion (gold bars or coins) or jewellery. The minimum quantity to be deposited would be 30 grams. Jewellery would be first melted, converted into gold and then can be deposited with the banks. There would be designated centres across the country to get the jewellery melted and certified for purity. These centres will take up to five hours to weigh, melt the gold, verify the purity and issue the certificate against the present practice of 90 days.

Minimum tenure of such account will be for a year with an option of rolling over in multiples of one year. Under the scheme, exemptions from Capital Gain Tax, Wealth Tax, and Income Tax are likely to be made available after ‘due examination’. Gold deposited under the scheme can be lent to the jewellers for their use, thus reducing the dependency on imports. India imports nearly 1,000 tonnes of gold every year.

While the proposal talks about base interest rate, thebanks will have the freedom to pay more. It has also been proposed to use gold deposit for 0.25 per cent of the Cash Reserve Ratio (CRR). Such a move will help the banks have additional liquidity for lending.

Earlier, a Gold Deposit scheme was introduced in 1999 with the aim to mobilise the idle gold in the country and put it to productive use. However, it was not very successful and less than 10 tonnes of gold was collected. Lower interest rate and a long time taken for issuing certificate were among the reasons for the disappointing performance of the scheme.

Gold monetisation

To attract big investors, the Gold Monetisation Scheme has been proposed. There is no floor limit for quantity to be deposited. Only bullion can be deposited under. There would be flat interest rate under the scheme which could be revised by the Department of Financial Services from time to time.

Gold deposited here would be auctioned and money realised would be deposited in a Gold Reserve Fund. Interest will be paid from this fund. There would be an added feature of hedging under the scheme. It means if prices come down from the price at the time of deposit, the Government will bear the difference.

Published on July 27, 2015

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