Gold Monetisation Scheme: All you need to know

Zee Media Bureau

The objective of the Gold Monetisation Scheme (GMS) is to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold.

Here are 13 key facts about Gold Monetisation Scheme you should know:

-The Gold Monetisation Scheme will replace the existing Gold Deposit Scheme, 1999. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them.

-Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme.

-The minimum deposit at any one time shall be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of gold. There is no maximum limit for deposit under the scheme.

-The gold will be accepted at the Collection and Purity Testing Centres (CPTC) certified by Bureau of Indian Standards (BIS). The deposit certificates will be issued by banks in equivalent  of 995 fineness of gold.

-The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes (MLTGD). While the former will be accepted by banks on their own account, the latter will be on behalf of the Government of India.

-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.

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

-Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be and whichever is earlier.

-During the period from the date of receipt of gold by the CPTC or the designated branch, as the case may be, to the date on which interest starts accruing in the deposit, the gold accepted by the CPTC or the designated branch of the bank shall be treated as an item in safe custody held by the designated bank.

-The Short Term Bank Deposits will attract applicable Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). However, the stock of gold held by the banks will count towards the general SLR requirement. The opening of Gold Deposit Accounts will be subject to the same rules with regard to customer identification (KYC) as are applicable to any other deposit account.

-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.

-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. The entities participating in the auction may include the Reserve Bank, MMTC, banks and any other entities notified by the Central Government. Banks may utilise the gold purchased in the auction for purposes indicated above. Designated banks should put in place a suitable risk management mechanism, including appropriate limits, to manage the risk arising from gold price movements in respect of their net exposure to gold. For this purpose, they have been allowed to access the international exchanges, London Bullion Market Association or make use of over-the-counter contracts to hedge exposures to bullion prices subject to the guidelines issued by the Reserve Bank.

-Complaints against designated banks regarding any discrepancy in issuance of receipts and deposit certificates, redemption of deposits, payment of interest will be handled first by the bank’s grievance redress process and then by the Reserve Bank’s Banking Ombudsman.