Gold Monetization Scheme: Mobilizing Gold for Economic Growth

The Government of India announced the Gold Monetisation Scheme (GMS) on September 15, 2015, with the objective of mobilizing gold held by households and institutions across the country. The scheme aims to facilitate the use of this gold for productive purposes, thereby reducing the country’s reliance on gold imports in the long run.

Components of the Gold Monetization Scheme

The Gold Monetization Scheme comprises the previous ‘Gold Deposit Scheme’ and the ‘Gold Metal Loan’ scheme, revamped and linked together under the GMS framework.

Revamped Gold Deposit Scheme (R-GDS)

The revamped Gold Deposit Scheme allows individuals and institutions to deposit their idle gold, which is then utilized for productive purposes. The gold is accepted at Collection and Purity Testing Centres (CPTCs) certified by the Bureau of Indian Standards (BIS). Banks issue deposit certificates in the equivalent of 995 fineness of gold. The designated banks that accept gold deposits include ICICI Bank, Corporation Bank/Union Bank of India, Indian Overseas Bank, Punjab National Bank, State Bank of India, HDFC Bank, Yes Bank, Dena Bank/Bank of Baroda.

Deposit Tenure:
- Short Term Bank Deposit (STBD): 1-3 years
- Medium Term Government Deposit (MTGD): 5-7 years
- Long Term Government Deposit (LTGD): 12-15 years
Interest Rates:
- STBD: Interest rate decided by banks based on prevailing international lease rates, other costs, and market conditions. Interest is borne by the banks.
- MTGD/LTGD: Interest rate decided by the government in consultation with the RBI and borne by the Central Government.
Redemption:
- STBD and MTGD: Customers can redeem the principal at maturity in Indian rupees equivalent to the value of the deposited gold at the time of redemption or in gold.
- LTGD: Premature redemption in INR only.
- STBD: Premature redemption in Indian rupees or gold at the bank’s discretion.
Tax Implications:
- Exemption of interest earned on gold deposit bonds from Income Tax under Section 10(15)(vi) of the Income Tax Act.
- Exemption from Wealth Tax under Section 2(ea) of the Wealth Tax Act.
- Exemption from Capital Gains Tax under Section 2(14)(vi) of the Income Tax Act.

Revamped Gold Metal Loan Scheme (R-GML)

The revamped Gold Metal Loan Scheme allows banks to provide gold loans to jewelers, using the gold mobilized through the R-GDS. The loans are provided based on terms and conditions set by the banks, under RBI guidance.

Gold Metal Loan Account: A Gold Metal Loan Account, denominated in grams of gold, is opened by the bank for jewelers. The gold mobilized through the short-term R-GDS is loaned to jewelers.
Delivery of Gold to Jewelers: Jewelers receive physical delivery of gold from refiners, and the banks make the requisite entry in the jewelers’ Gold Loan Account.
Interest Rates: Interest rate charged on the GML is decided by the banks with guidance from the RBI.
Tenor: The current tenor of the GML is 180 days. Based on experience, this tenor may be re-examined and modified if required.

Indian Gold Coin

The Indian Gold Coin is part of the Gold Monetization Programme. It is the first-ever national gold coin minted in India, featuring the National Emblem of Ashok Chakra on one side and Mahatma Gandhi on the other. The coins are available in denominations of 5, 10, and 20 grams and are of 24 carat purity. The Indian Gold Coin is unique, featuring advanced anti-counterfeit measures and tamper-proof packaging. The coins are hallmarked as per BIS standards.

Key Amendments to the Schemes

The Ministry of Finance approved several amendments to the Gold Monetisation Scheme and the Indian Gold Coin Scheme to make them more attractive and successful:

Increased Branches: Increasing the number of Public Sector Bank branches designated as GMS service branches in all towns.
Dematerialization: Dematerialization of MTGD and LTGD Deposit Certificates to make them tradeable and mortgageable.
Mobilisation Agents: Engaging jewelers and refiners as Gold Mobilization Agents and CPTCs.
Interest Payment: Interest payment for STBD to be denominated and paid in INR terms.
Reduced Minimum Deposit: Reducing the minimum deposit under R-GDS to 10 grams of gold.
Locally Refined Gold: Permitting banks to buy standard locally refined/sourced gold from refineries and Gold Spot Exchanges.
Interbank Lending: Allowing interbank lending of IGDS/LBMA standard bullion.
Digital Platform: Development of a GMS Digital Platform.
Repayment of GML: Repayment of GML in lots of 1KG and using locally sourced IGDS standard bullion.
Online Sales: SPMCIL to mint and sell Indian Gold Coins through an online e-commerce platform and various channels, including airports.
Additional Denominations: Availability of IGC in both 999 and 995 purity, minting in smaller denominations, and flexibility to mint commemorative and other order gold coins.

Conclusion

The Gold Monetization Scheme is a significant step towards mobilizing idle gold in India and utilizing it for productive purposes. By integrating and revamping existing schemes, the GMS provides a comprehensive framework for gold deposits and loans, benefiting both individuals and jewelers. With continuous efforts to simplify and enhance the scheme, the Government aims to make GMS more attractive and successful, ultimately reducing India’s reliance on gold imports and strengthening the economy.

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