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RBI Issues Gold Monetization Scheme Guidelines for Banks
Oct 26, 2015

The Reserve Bank of India (RBI) announced guidelines for banks on implementation of the gold scheme approved by the Government last month. The gold monetisation scheme (GMS) allows individuals, trusts and mutual funds to deposit gold with banks and earn an interest on it. The scheme will be launched officialy on 5th November.

Key Features

  • The GMS will replace the existing gold deposit scheme, started in 1999. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless these are withdrawn by the depositors prematurely as per existing instructions.

  • The minimum deposit under the scheme should be raw gold equivalent to 30 grams of 995 fineness.

  • The central bank has not fixed any maximum limit for GMS.

  • Deposit certificates will be issued by banks in equivalence of 995 fineness of gold.

  • The principal and interest of the deposit will be denominated in gold.

  • The designated banks will accept gold deposits under the short-term (1-3 years) bank deposit as well as medium-term (5-7 years) and long-term government deposit schemes (12-15 years).

  • There will be a provision for pre-mature withdrawal, subject to a minimum lock-in period and a penalty (to be determined by individual banks).

  • All designated banks will be eligible to implement the scheme.

  • The principal and interest of the deposit under the scheme shall be denominated in gold.

  • Resident Indians (Individuals, HUFs, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme.

  • Joint deposits of two or more eligible depositors are also allowed under the scheme and the deposit in such case shall be credited to the joint deposit account opened in the name of such depositors.

  • The existing rules regarding joint operation of bank deposit accounts including nominations will be applicable to these gold deposits.

  • All deposits under the scheme shall be made at the Collection and Purity Test Centre (CPTC). However, at their discretion, banks may accept the deposit of gold at the designated branches, especially from the larger depositors.

  • Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be, whichever is earlier.

  • During the period commencing from the date of receipt of gold by the CPTC or the designated branch, as the case may be, to the date on which interest starts accruing in the deposit, the gold accepted by the CPTC or the designated branch of the bank shall be treated as an item in safe custody held by the designated bank.

  • On the day the gold deposited under the scheme starts accruing interest, the designated banks shall translate the gold liabilities and assets in Indian Rupees by crossing the London AM fixing for Gold/USD rate with the Rupee-US Dollar reference rate announced by RBI on that day.

  • The prevalent custom duty for import of gold will be added to the above value to arrive at the final value of gold. This approach will also be followed for valuation of gold at any subsequent valuation dates and for the conversion of gold into Indian Rupees under the Scheme.

  • The designated banks need to submit a monthly report on GMS to the RBI in the prescribed format.

GMS, which modifies the existing Gold Deposit Scheme (GDS) and Gold Metal Loan Scheme (GML), is intended to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold.


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