When
In the 2015-16 Union Budget, Finance Minister Arun Jaitley proposed the Gold Monetisation Scheme, which would replace the erstwhile Gold Deposit and Gold Metal Loan Schemes. He also laid out plans for a Sovereign Gold Bond Scheme, as well as a gold coin minted in India. After parleys and discussions, the cabinet approved the Monetisation and Sovereign Bond schemes on September 9, 2015. On October 31, 2015, the government invited applicants for the gold bonds from November 5-20. The bonds will be issued on November 26. On November 5, Prime Minister Narendra Modi launched the gold monetisation scheme and the gold coin in three denominations.
Who
Citizens can deposit gold in any form with the collection/assaying centres, which would then issue a receipt for the same after melting and testing it for purity. With this receipt, gold owners can ask banks to start a Gold Savings Account in their names. Jewellers can loan this gold by starting a Gold Metal Loan Account. “Jewellers are also part of this scheme. We have been sending various recommendations to the government to do everything — including melting and certification — right in the showroom,” says GV Sreedhar, chairman of GJF. In the case of the Bonds Scheme, the RBI would be the issuing authority. MMTC is the vendor for the gold coins.
What
The Gold Monetisation Scheme would earn depositors interest on their otherwise idle gold. As per RBI, the annual rate of interest on short term deposits will be fixed by participating banks (currently 12), while for mid-term (5–7 years) and long-term (12–15 years) the interest is 2.25 per cent and 2.5 per cent respectively.
The tenor of the Sovereign Gold Bond (SGB) is eight years with exit options from the fifth year. The Reserve Bank of India (RBI) has fixed the public issue price of the inaugural Sovereign Gold Bond issue at Rs 2,684 per gm. The coins come in 5 gm (price Rs 14,600) and 10 gm (price Rs 28,900). The 20 gm gold bar costs Rs 57,600.
Why
The gold monetisation scheme aims to mobilise the gold held by households and institutions, estimated at over 22,000 tonnes, and reduce gold imports. According to GJF’s Sreedhar, “We are importing about 900 tonnes of gold annually. By this scheme, we can target to bring down imports by 30 per cent. For instance, we might import only 600 tonnes and the remaining can be harnessed through this scheme. Moreover, if a person possesses one kg gold, only 30 to 35 per cent of it is utilised, and the rest kept idle.” The SGB is intended as an alternative to purchasing gold. To make it attractive, purchase and redemption price will be based on the current gold price, and interest will be paid on the original value of investment.
Where
There are 331 BIS approved collection centres. Tamil Nadu has the most number of collection centres with 57, followed by Maharashtra (38), Delhi (25), and Gujarat (27). From this, the Centre will notify a list of BIS certified CPTCs (collection and purity testing centres). With 40 collection and purity testing centres already certified, the designated banks will be free to select and authorise them for handling gold as their agents. The gold bonds, for which the application window is currently open, will be issued by the RBI through designated post offices and bank branches. The gold coins, with Ashok Chakra on one side and Mahatma Gandhi’s engraved image on the other, will be sold by MMTC through its outlets and dealer network.
How
Under the Gold Monetisation Scheme, the minimum deposit at any one time shall be 30 grams of gold. There is no maximum limit, and the deposits are exempted from capital gains tax, wealth tax, and income tax. The gold deposited will be loaned by banks to jewellers. Either gold or cash can be claimed at the time of redemption with preference being stated upfront. In the case of SGBs, the RBI will redeem the gold bonds at the previous week’s simple average of closing price of gold of 999 purity bearing a fixed interest of 2.75 per cent paid semi-annually. Interest is subject to tax at the applicable income tax rate, and any gains at redemption will attract capital gains tax.
Sovereign Gold Bonds
Issuance By RBI on behalf of the GoId
Eligibility Resident Indian entities
Denomination In multiples of gram(s) of gold with a basic unit of 1 gram
Tenure Eight years with exit option from fifth year to be exercised on the interest payment dates
Minimum size 2 units
Maximum limit 500 grams per person per fiscal year
Issue / Redemption price Rupees on the basis of the previous week’s simple average of closing price of gold of 999 purity published by IBJA
Interest rate Fixed rate of 2.75% per annum payable semi-annually
Deccan Herald is on WhatsApp Channels| Join now for Breaking News & Editor's Picks