Topic
Gold Monetisation Scheme
Essay
- Monetization deals with a system in which a product is transformed into domestic currency – rupee. Gold monetization means obtaining the rupee price of the gold.
- GMS refers to the system in which a depositor deposits gold with a bank that, after transforming into gold bars, is then borrowed by the bank for its debtors (assume jewelry manufacturers).
- The gold deposited with the bank may be in any manner (bullion, jewelry, etc.) but it shall be measured based on the pure gold content in the deposit which is checked by an approved analyst while taking away valuable gemstones in jewelry.
- The balance, as well as interest payable to the gold depositors, will be calculated in gold.
- The scheme will only include, independently or conjointly, deposits by resident Indians (individuals, HUF, trusts including mutual fund/exchange-traded funds registered as a result of SEBI (Mutual Fund) Regulations and Companies.
- More than 20,000 tonnes of gold exists unused in Indian homes.
- The government of India introduced the Gold Monetisation Scheme (GMS) to convert this surplus gold into a valuable commodity.
- The scheme will also enable jewelers to acquire a loan.
- This gold can also be sold for profit by financial institutions such as banks and NBFCs.
- The government declared in the Union Budget (2015-16) that it would change the current Gold Deposit Scheme (GDS) (1999) and the Gold Metal Loan (GML) Scheme (1998). However, since GMS incorporates the best characteristics of both the schemes, RBI explained afterward that GMS would contain both GDS and GML.
- The central bank further explained in its directives that the GMS would remove the GDS (1999), but the excellent GDS deposits will keep on going till maturity if the depositors do not take away them untimely. The report also states that the current GML Scheme keeps ongoing to operate about the GMS connected GML.
Did You Know? HUF – means Hindu Undivided
Family - treated as a person under section 2(31) of the Income Tax Act 1961.
| Introduced by | Introduced in | Prime objective |
|---|---|---|
| Launched by the government of India | On [latex]{5}^{th}[/latex] November 2015 | to gather and make effective use of gold owned in the country by families and organizations. |
- The scheme seeks to reduce long term imports of gold.
- The scheme would allow investors to obtain dividends on the quantity of gold deposited.
- To enable current gold mobilization schemes quite productive and extend their scope from simple gold mobilization to bring this gold to a wide variety of valuable purposes such as reinforcing Central Bank capital conditions.
- To minimize dependence on gold imports over time as India is one of the largest gold consumers with almost no national manufacturing.
- To provide gold easily accessible in raw material as a loan from the banks to the gemstones and jewelry industry in the country.
Secure handling of gold – Indians prefer to store their gold in storage lockers in banks and carry it out for wedding/family functions or sale it off. But they have to offer the bank a yearly price for the storage locker. Gold Monetization the scheme provides the gold protection not only by keeping it but also by delivering it as cash or physical gold once the scheme reaches maturity.
2. Value of gold – Not only you can have profit income by depositing the antique and unused gold in the Gold Monetization Scheme but you also have the right to cash the gold at maturity.
3. Deposit elasticity – Under the Gold Monetization Scheme, you can store your gold in any manner. You could carry in bars or coins of gold and often jewelry. But in this scheme, gold jewelry covered in precious stones cannot be stored.
4. Dynamic deposit amount – In a Gold Monetization Scheme, the minimum value you can create is 30 grams of pure gold. There is no restriction to the top at all.
5. Realistic terms – Under the Gold Monetization Scheme, 3 duration deposit plans are present.
Short term: 1 to 3 years
Medium-term: 5 to 7 years
Long term: 12 to 15 years
6. Tax advantages – You need not pay taxes on the profit earned by the Gold Monetization Scheme. Financial profits are also excluded from taxes on income and sales.
7. Examine of genuineness – There have been over 330 Collection and Purity Testing Centres throughout the country for examination and inspection of the authenticity of the deposited gold.
Did You Know? SEBI – means Securities and Exchange Board of India - Established in 1988 and given statutory powers on 12 April 1992 through SEBI Act 1992.