Six banks, led by State Bank of India (SBI), collectively mobilised 68 per cent more gold year-on-year (yoy) from households and temple trusts, among others, at 4,643.25 kg in 2019-20 against 2,763.12 kg the previous year under the Gold Monetisation Scheme (GMS).

GMS is aimed at mobilising the gold held by households and institutions and facilitating its use for productive purposes (by making it available to the gems and jewellery sector), and in the long run, reduce the country’s reliance on import of the yellow metal.

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Karnam Sekar, former MD & CEO of Indian Overseas Bank, attributed the jump in gold mop-up by banks to increasing awareness among customers, especially temple trusts, about earning a return on the yellow metal. Gold locked away in temple vaults is an idle asset.

“Also, banks are gradually channelising the gold collected under the GMS to jewellers by way of gold metal loans. So, there is a link between the two,” said Sekar.

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SBI tops

In FY20, SBI accounted for much of the mobilisation of the yellow metal. India’s largest bank mopped up 94 per cent (or 4,370.65 kg) of the gold mobilised by banks, according to the latest Finance Ministry data. Gold mobilised by the bank from customers was about 67 per cent higher over the previous year’s 2,611.60 kg. In percentage terms, SBI’s share in the overall mop-up in FY20 was a shade lower than 94.5 per cent in FY19.

 

 

 

HDFC Bank upped its game collecting 209.99 kg of gold in FY20 (or 4.5 per cent of the overall mobilisation) against 69 kg (or 2.5 per cent) in FY19. Mobilisation of gold by Nova Scotia Bank halved to 40 kg (about 0.9 per cent) in FY20 from 80 kg (about 3 per cent) in FY19.

Indian Overseas Bank and ICICI Bank mopped up 15 kg (2.19 kg) and 6.09 kg (0.33 kg), respectively. Punjab National Bank collected 1.51 kg against none in the previous financial year.

The cumulative quantity of gold mobilised by banks under the GMS stood at 20,547 kg between November 5, 2015 and January 31, 2020, with the number of depositors being 2,952, according to the Ministry data.

Minimum/maximum deposit

The Government launched the GMS in 2015. The minimum deposit at any one time is 30 grams of raw gold (bars, coins, jewellery excluding stones and other metals). There is no upper limit for deposit under the scheme.

Depositors can avail themselves of two options for gold deposit — Short Term Bank Deposit (STBD) of 1-3 years and Medium and Long-Term Government Deposit (MLTGD) for 5-15 years.

Interest rates

STBD interest rates are decided by individual banks and subject to change from time to time. For example, the interest offered by SBI on a one-year gold deposit is 0.50 per cent; for 1 to 2 years 0.55 per cent; and 2 to 3 years is 0.60 per cent.

For MLTGDs, the interest rates are decided by the government in consultation with the RBI and also subject to change from time to time. On MTGDs (5-7 years tenure), banks offer 2.25 per cent and on LTGDs (12-15 years), the interest rate is 2.50 per cent.

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