Home Knowledge Path to Progress.... Gold Monetisation Scheme

Path to Progress.... Gold Monetisation Scheme

by Madhavi Mihir Bhuta (National Executive Member, BJP Mahila Morcha)
Sep 29, 2020

There is a popular saying that ‘Everything that glitter is not Gold...’

But, the truth is that Gold can glitter, even if it is kept in locker.

And, that is exactly what the nation has achieved through Gold bonds.

Since the time eternal, Gold, Silver and Precious stones have been integral part of Bharatiya culture. Travelling back to our roots in Vedic age, adorning themselves with Gold has been tradition followed by the richest to the poorest.

Gold is considered extremely auspicious in Hindu culture. The ritual of owning and presenting Gold, on special occasions is an age old custom in our nation.

Earlier, with least medium of transactions available, Gold was used as medium for Barter and as well as only investment instrument. It was customary to possess at least some amount of Gold, irrespective of person's financial status.

With passage of time, foreign rule brought Western influence and though Gold and Silver remained precious possessions, its utility as ‘Anytime cash’ started diminishing. For safety and security reasons, ornamenting one’s self became limited. Hence, the valuable possessions remained within the safety lockers and hardly got to see the light of the day.

Bharat, is considered a poor and developing nation...

But, You will be shocked to know the ‘wealth’ in the form of Gold, that remains unutilised in Bharatiya homes.

We are such a ‘poor’  country that has   25000 tonnes, which is worth around 110 Lakh Crores of Gold lying idle (in unproductive form) in our homes!!!

The root cause for Bharat’s poverty is such unproductive assets. And our such a huge asset, remains futile, is pointless.

As Hon. Prime Minister has described, “Imagine a huge lake, a water body, is constructed, using millions of Rupees, yet people and farmers in the area remain waterless because no canal to transfer the water  from the lake to the farms is built, what is the use of such dire expense...? Similar is the case of Gold. If Gold is kept locked up in lockers and not put to fertile utility, it becomes worthless.”

The Gold Monetisation Scheme was first discussed during the Union budget 2015-16 by the Union cabinet and GMS was launched by the Government of Bharat on November 5th 2015 as an initiative for mobilising the Gold lying in the Bharatiya households for productive purposes. Along with the launch of GMS, the Government also announced the launch of Sovereign Gold Bond scheme and development of Bharatiya Gold coins.

Gold Monetisation Scheme facilitates the Gold depositors to earn interest of 2.25% per Annum for a short term deposits of one to three years. An interest rate of 2.5 % is provided to the depositors for medium and long term deposits. The long term deposits should be between 12-15 years, with no maximum limit of investment. A minimum deposit of 30 gms raw Gold can be made under this scheme in the form of Gold bar, coin or Jewellery.

The scheme allows premature withdrawal after a minimum lock-in period. An interest rate of 2.5% is provided by the GMS, which is higher than the rates offered by the previous Gold investments.

The scheme also offers redemption of the short term deposits in the form of either Gold or Rupees at current rates applicable.

Resident Bharatiya can deposit Gold under Gold Monetisation Scheme. The deposits will be denominated in grams of Gold with purity 995.

(Individuals, HUF, Trusts including Mutual Fund’s/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies.)

Features of GMS linked GML.

The Gold mobilised under the Short term Bank deposit (STBD) might be given to jewellers as Gold Metal Loan. The designated banks can also buy the Gold auctioned under the Medium and Long term deposits.

The Jewellers will get the Gold delivered physically either from the designated bank or from the refiners, depending on the location where the refined Gold is stored.

The nomination banks, as well as the designated banks, will be eligible to import Gold only for the redemption of the Gold deposits mobilised under the STBD.

RBI has given freedom to the designated banks to determine the interest rate for the GMS-linked GML.

The tenure of the GMS-linked GML will be the same as the tenure of the existing GML scheme.

Dina Rao, a middle aged woman belonging to middle class worked as Librarian in Mysore, Karnataka. Their was a happy and contended family of four, with two school going children.  Her husband, who owned a small Automobile business, worked hard for the better future. Unfortunately, her husband Mahesh Rao, was diagnosed with Gallbladder ailment and had to undergo lengthy and costly treatment. In the due process, the medical insurance that the family had invested in drained out. The need for emergency operation on a bank holiday put the wife in a difficult situation. With banks shut, she had no option left but to go to relatives with begging bowl to borrow funds.

In such distress, she remembered these Gold Bonds, where she had stored all the Gold that she had inherited from her forefathers. She surely could not have gone to sell the Gold in the middle of the night, with markets and banks closed, but the same Gold, stored in the form of Gold Bonds came to her rescue. She deposited the Bonds in the hospital as the deposit and situation was saved.

Another lucrative benefit comes with interest earned by the Gold deposited by investors being exempt from Tax.

Investors in physical Gold face a key challenge with the safe storage spaces. While Gold’s value surely grows, keeping it in safe custody doesn’t come cheap. Gold owners are compelled to deposit Bullion in bank lockers, which is an additional cost and comes with no insurance for the contents. Hence, the safer option is storing Gold with GMS, which promises return on the deposits.

Gem & Jewellery Export Promotion Council (GJEPC) had proposed to link GMS with Income Tax which states that Gold Jewellery to the extent of 500 grams per married women, 250 grams per unmarried women and 100 grams per male member of a family need not be seized, even if prima facile it does not seem to be matching with the income records of the assessee.

Our country has to import 1000 Tonnes of Gold every year. Gold in any form, Gold coin, Gold bar or Jewellery, if stored with the GMS, would support the nation to control the import of Gold and save valuable foreign exchange.

For all these 65+ years post independence, our nation has been considered a ‘poor’ nation. Imagine, a poor nation with 25,000 tonnes of Gold stored away in homes in unproductive form!!!

The visionary Prime Minister’s initiative of re-modelling the idle assets into high-yielding assets, is in true sense “Sone pe Suhaga.”