Gold Monetization Scheme is the scheme which lets you earn interest from your idle gold (in any form) without selling it. This scheme addresses the physical gold held by households and institutions of the country. Under this scheme, customers can deposit gold in any physical form (like, coins, jewelry or bars) in the bank and can earn interest based on weight or as per value appreciation.
What are the Objectives of this Scheme?
India is one of the largest importer of the gold with almost no indigenous supply. This scheme will help Indian Government to use the gold for more productive purposes and to reduce reliance on the import of gold.
How to open an account in bank?
The scheme is pretty much similar to fixed deposits where customers can deposit their physical gold and earn interest. The minimum deposit shall be equivalent to 30 grams as per RBI norms. There is no maximum limit under the scheme. The purity of this gold have to be testified by (CPTC) Collection and Purity Testing Centers. These centers assess purity of the gold and certify along with gold content. When a customer provide this certificate, Bank will open a ‘Gold Saving Account’ and will credit the quantity of gold. Separately, CPTC will also inform bank about the value to be credited in the customer account.
Once this is done, bank will send gold to refineries for melting or storage or sell it to the other designated banks participating in the scheme. At the time of maturity, depositor will receive either gold or equivalent rupees, based on the option he choose at the time of opening an account. This option cannot be changed later.
The scheme come in three different tenures:
- Short Term (1-3 years)
- Medium Term (5-7 years)
- Long term (12-15 years)
What are the benefits of this Scheme?
- Customer can earn interest on their idle gold. Even broken ornaments/jewelry can give a chance to earn interest under the scheme.
- Appreciation in the value of gold can also benefit customer with the interest earning.
- The gold deposited by customer under the scheme, will be safe with the bank.
- All the earnings are exempted from capital gain tax, wealth tax and income tax.
A few important points:
- As per RBI, designated banks are free to decide the interest rates on these deposits.
- Depositors can do premature withdrawals subject to minimum lock-in period (for medium term 3 years lock in and for long term 5 years lock-in) and penalty amount will be decided by the bank. This will also subject to reduction in interest payable.
- Customer/depositors can open this account in joint names including the nomination service.
- Resident Indians, HUF’s, Mutual Fund companies or ETF’s registered under SEBI can make deposits under this scheme.
- Last but not least, customers who want to invest their physical gold through this scheme should take a note that if you are depositing gold jewelry or ornaments then it will be melted and checked for purity by testing centers. Therefore, at the end of term/maturity, you will get back only gold bars and not original piece of jewelry.