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Things you need to know about gold monetisation scheme

The Gold Monetization scheme is almost like having a gold savings account. While you keep your gold at home or in a bank locker, the security of physical gold is always at risk. Additionally, a bank locker also incurs a certain maintenance fee which is an unnecessary expense. In case of a gold monetization scheme account, you can not only keep it safely, but also earn a certain interest as the price of the metal rises up. Another thing to remember is that gold is a very valuable commodity in the Indian culture. Most citizens prefer to keep it in possession. To reduce the risk of robbery and to earn interest for the welfare of the nation, the government came up with schemes so that people can make good use of their purchase. The Gold monetization scheme was introduced quite recently in the fiscal year 2015-2016 as one of the initiatives to achieve the abovementioned purposes. However, if you are skeptical about investing in this scheme, then here are some more crucial things that you should know about it:

Important things to know about the Gold Monetization Scheme

There are various different features of the gold monetization scheme. The biggest benefits are:

  • Makes storage much easier: It is important to remember that Indians spend a lot of money on maintaining bank lockers that keep gold or take the risk of storing gold at home. Otherwise, this gold is taken out eventually, only for weddings and family functions or when it needs to be sold off. When you enroll for a gold monetization scheme, you will not only get security but you would also be able to get it at a better rate as per the market’s current situation. You can also get your gold in form of money or just take physical gold back as per your convenience.
  • Get more utility out of gold: When you keep your unutilized or old gold stored inside a safety deposit locker, in your house or even in your bank, then you are just simply ensuring its security. However, you are not using it for its real purpose- which is for better investment and returns too. If it is not in a scheme, then it will be lying idle and you will not be able to avail any benefit out of it. Even when gold is sold in the market, you will only be able to earn money on the spot. But, with a gold monetization scheme, you will not only be able to achieve the interest money, but also be able to exchange it for money.
  • Have a flexible option for deposits : One of the best features of a gold monetization scheme is that you can deposit your gold in any form which is convenient for you. The gold can be deposited in the form of bars and coins, or even jewelry. However, if your gold jewelry is full of gemstones, then it cannot be deposited under the gold monetization scheme.

  • You can also see flexibility when it comes to deposit quantity : Unlike many other schemes, there is no maximum limit of deposit for this particular scheme. However, the minimum deposit that you will require is 30 grams of 995 fineness gold.

  • Tenure of deposit plans is quite convenient : There are three different deposit plans which are available for investment under this scheme. The three tenures that you can opt for are short term, mid-term and long term respectively. However, if there is a need and you need to withdraw all of your money before the tenure ends, then you are free to do so as well.
  • Earn interest rates : Once you begin to see gold as an investment, you can earn interest which purely depends on the term your choose for your deposit. For instance, short term deposit rates are decided by the institutions concerned while the Central Government regulates the medium and even long term deposit interest rates. The current rate for medium term (5 to 7 years) is 2.25% per annum and long term rates (12 to 15 years) is 2.5% P.A.
  • A different approach towards the calculation of interest : One of the biggest features of the gold monetization scheme is that it would not calculate interest in the traditional method of money. It gives you returns with the value of gold in grams. So, for instance, if the interest rate is 1%, then it is equated to 1 gram per 100 grams. However, in the case of long-term and medium government deposits, the interest calculated is in the form of rupees, which is calculated keeping in mind the value of gold during the time of deposit. So, in such a case, if you deposit 50 grams worth of gold, valued at Rs. 1,50,000 at an interest rate of 2.5%, you will receive Rs. 3,750 per year as interest value.
  • Deposit withdrawal : When you opt for a short-term plan, you have the liberty to specify how you want your returns. This can be done when the deposit is being made and whether you want the returns in form of physical gold or monetary means. In case, you choose the option of physical gold, then you will receive gold coins of 995 fineness. Under this scheme, the banks are not a storage unit and use gold coins for further trading, so as to give you attractive returns. The banks further convert the gold you deposit into coins or bullion and may choose to either- send it to the Metals and Minerals Trading Corporation of India, in order to get Indian gold coins or simply sell it to other banks or jewelers.
  • Verification of purity: In order to ensure smooth running operations of this scheme, there are over 330 collection and purity testing centers that have been identified and approved across the nation for verification of the purity of gold. Once, somebody opts for this scheme and deposits the gold, they would need to take this gold to the closest center which is approved by the government. Here, the quantity and the purity of the gold is checked. The center takes your gold and gives you a certificate, which is further converted into a scheme certificate by the bank.
  • Earn benefits on tax: If you want to earn benefits on the taxes levied through this scheme, then there is a good news for you. You would not need to pay any capital gains tax on the returns that you make through this particular scheme. The capital gains tax exclude income tax and wealth tax too while being exempt from both. In a nutshell, this scheme gives most Indian households the option to make an additional source of income and profit from the gold which is simply lying at home or is sitting in bank lockers. It is also valid for individuals, jewelers, corporates, and trusts. It enables one of our most precious metals to become a great source of profit for most of the people in the nation. However, one needs to remember, that under this scheme, your jewelry would not retain the same form in which it was deposited. Instead, you would get the returns in form of money and gold coins as mentioned above.

FAQs On Gold Monetisation Scheme

Are banks supposed to get an RBI approval to participate in the Gold Monetisation Scheme?

While the answer for this question is no, a bank should submit the details of implementation to RBI. This includes the names of the refiners and the CPTCs with whom they have made a tripartite agreement. Banks are also required to give a report on the gold that is mobilized under this particular scheme by all the branches in a format that is prescribed by the RBI.

Can a deposit be made under GMS for a tenure of 4 years or 8 years?

A Short-term deposit made for three years, which can be rolled over to 4 years. However, this is not valid for long-term and medium-term deposits.

Is it compulsory to complete the KYC for potential customers of GMS?

This needs to be done, unless the depositor is already KYC compliant with the bank.

If the purity determined by CPTC is not acceptable by a customer, then can they get back their jewelry?

Yes, but this decision needs to be taken before fire assaying begins. After the XRF test, the consumer would get back his gold, but only in a post melted

When will the refined amount of gold deposited be credited? Can it be credit once the customer produces the certificate of deposit?

The refined amount of gold will only be credited once an intimation has been made from the CPTC side regarding the deposit.