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Gold Monetisation Scheme to be Launched
May 22, 2015

The government released the draft guidelines for its ambitious gold monetisation scheme that aims to cut down gold imports in the country. The guidelines have been notified nearly three months after the scheme was announced by Finance Minister Arun Jaitley in the Union Budget.

Key Features

  • The scheme is meant to mobilize gold held by domestic households and institutions. Gold collected through the scheme will be made available to jewelers for manufacturing of new jewellery and other items.

  • The scheme will initially be launched at a few places because the government will have to first set-up infrastructure for facilitating easy and secure handling of gold.

  • Gold collected from consumers will first be cleaned and measured at test centres; it would then be melted to test for purity.

  • After the tests, consumers can either deposit the gold for a fee or take it back after paying a nominal fee.

  • The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams.

  • Those willing to deposit the gold will be given a certificate mentioning the amount and purity of the deposited gold.

  • Banks will open a 'Gold Savings Account' on the basis of such certificates.

  • Consumers will be paid interest on their gold savings account after 30/60 days of account opening.

  • The amount of interest rate to be given is proposed to be left to the banks to decide.

  • Both principal and interest will be paid to the depositors of gold, will be 'valued' in gold. For example if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms.

  • The customer will have the option of redemption either in cash or in gold, which will have to be exercised in the beginning itself (that is, at the time of making the deposit).

  • The tenure of the deposit will be minimum 1 year and in multiples of one year. Like a fixed deposit, breaking of locking period will be allowed.

  • Gold savings account will be exempt from capital gains tax, wealth tax and income tax.

  • Gold deposit accounts will utilise the 20,000 tonnes available within the country and help in cutting down the 800-1,000 tonnes of gold the country imports every year. 

India in World Gold Council Report 2014

In its report for 2014 World Gold Council highlighted key policy recommendations to monetise India’s large stock of household gold. The report titled ‘Why India Needs a Gold Policy’ makes seven key recommendations: 

1. Establish an India Gold Exchange to ensure pricing standardisation, increase transparency and improve supply and demand analysis.

2. Establish a Gold Board to manage imports, encourage exports and facilitate development of the infrastructure needed to ensure the Indian gold market functions to maximum effect.

3. Develop accredited refineries in line with international standards including upscaling the current domestic refineries.

4. Allow Indian banks to use gold as part of their liquidity reserves.
This would incentivise them to introduce gold-based savings products.

5. Drive monetisation of gold by incentivising banks, revitalise Gold Deposit Schemes, introduce gold-backed investment and savings products.

6. Create a more active marketing strategy for Indian handcrafted jewellery. This could boost exports and highlight India’s expertise in this highly-valued sector e.g. by promoting handcrafted ‘India-made jewellery’ like the Swiss-made watches.

7. Drive the standardisation of gold so that buyers and sellers can have faith in both the quality and price of their products. Introduce guidelines for compulsory quality certification of all forms of gold to encourage accountability and foster an environment of trust.

The report also assesses the policies adopted in countries like Turkey and China; that have faced challenges similar to India and have devised public policies which have monetised the local stock of gold to positive effect.


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