Gold Monetization Scheme – How much do you Know about it?

Gold Monetization Campaign IndiaOn Tuesday, 19th of May 2015 the government released a draft notification containing all the guidelines. This scheme was announced during the Union Budget 2015. The Gold Monetization scheme is to be implemented for the sake for reducing the gold import pressure. As this particular scheme is new, there are various doubts and questions in the minds of citizens. This article has been aimed to address all aspects of this ambitious scheme.

This new gold monetization scheme will replace the 1999 gold deposit scheme and gold metal loan scheme. Both of these schemes were not popular and people showed minimal interest. It would be interesting to see how people respond to this new scheme.

Gold Monetization Scheme Complete Details – How will it Work,Application, Interest Rate, benefits & Other Details

India is one of the top importer of gold in the world. Around 1K Tonnes of gold is imported every year. This high import of gold adds to financial burden as well as forces the govt to levy high import duties. Considering this, the government wanted to covert the country’s gold holding into cash. This task is not that much easy as it sounds. As per the Gold monetization Scheme draft, this scheme would enable the participation of depositors such as households, jewelers to open gold savings account in respective banks. This way gold holdings of the individuals will be placed with banks.

How will Gold Monetization Scheme Work

Once the households and jewelers will place their gold holdings with a bank, the bank will pay interest. The bank will then lend this gold to jewelers who require it.Such jewelers have to pay interest to the bank.

This whole process is very similar to the normal banking process where people deposit money and receive interest from banks. The banks then use that collected money to provide loans to the needy. Banks in turn receive interest on the loan. In case of gold monetization scheme, the asset would be gold not money.

Joining the Gold Monetization Scheme – How to Apply

Stage 1 – Preliminary Test

  • Interested households or jewelers will deposit their gold. Using a preliminary XRF machine test, the customer will be informed about the approximate amount of pure gold. If customer is satisfied with the test, he needs to fill a KYC form and give his consent of melting gold.

Note : If the customers is not satisfied with the gold purity tests, he is free to take his jewelry back

Stage 2 – Fire Assay Test

Once the customers agrees to melt the gold, a further test of purity will be conducted. In this test dirt, studs, meena will cleaned. The studs will be handed over to the customer there itself. The net weight of the gold after the removal will be told to the customer. After this the gold will be melted in front of the customer and its purity will be ascertained through a fire assay.

Stage 3 – Depositing the Gold

  • After the preliminary and Fire Essay test, the results will be told to the customer. At this very stage also, if customer is not satisfied with the results, he can take back the gold in the form of gold bars by paying a nominal fee to that center.
  • If customer is satisfied with the results, he will be given a certificate by the collection center which will contain the amount and purity information of the gold.

Acceptable Minimum Quantity of Gold

  • To encourage even the small depositors across the country, the minimum quantity has been proposed to set as 30 grams
  • Gold in any form i.e. Bullion or Jewelry will be accepted

Schedule of Fees :

1)   Melting charges :

  1. a) Minimum charges/upto 100 gms – R 500 per lot
b)100 gms to 200 gms– Rs. 600
c)200 gms to 300 gms–  Rs. 700
d)300 gms to 400 gms– Rs. 800
e)400 gms to 500 gms– Rs. 900
f)500 gms to 600 gms–  Rs.1000
g)600 gms to 700 gms–  Rs. 1100
h)700 gms to 800 gms–  Rs.1200
i)800 gms to 900 gms–  Rs.1300
j)900 gms to 1000 gms– Rs.1400

2)   Testing/fire assaying charges                     – Rs. 300

3)    Stone removal charges                              –  at actuals

Minimum charge                                       –   Rs. 100

Opening of Gold Saving Bank Accounts under the Monetization of Gold Scheme –

Stage 4 –

  • After the customer will produce the certificate(obtained as stage 3) at the bank, the bank in turn will open a “Gold Savings Account” for the customer. The quantity of gold will be credited in the account of the customer.

Benefits to the Customers –

The banks will commit to pay interest to the customer. The interest will be payable after 30/60 days. The very important aspect to attract the customer i.e. the interest rate will be decided by the banks themselves. It is to be noted that the principal and interest to paid will be valued in gold.

Example –

If any customer has deposited 100 gm of gold and bank is offering 5 percent of interest rate, then on the maturity the individual  will have credit of 102 gms

Costumer will have the option of redemption. it can be either in cash or in gold.

The minimum tenure of the deposit will be 1 year and will roll out in multiple years. Similar to a Fixed deposit,breaking of lock in period is allowed

Utilization of Collected Gold

The government has planned to utilize the so collected gold as –

  1. CRR/SLR
  2. Coins
  3. Lending to Jewelers
  4. Exchanges
  5. Foreign Currency

Conclusion – Gold Monetization Scheme is yet to be implemented, however the draft of the scheme educates about its application. It seems like it is great step ahead and will ultimately help the government to get rid of Gold Import in the coming times. However, the deciding point will be the participation of the people.

If you want to share your views about this campaign, feel free to write in the comments section

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