Gold Monetisation Scheme

The Gold Monetisation Scheme was introduced by the Central Government to provide the people with different options to monetize the privately held gold. With Indians having a strong appetite for gold and gold jeweller, the Gold Monetisation Scheme can be leveraged to earn interest by trading the gold on hand. The Government's Revamped Gold Deposit Scheme and the Revamped Gold Metal Loan Scheme also fall under the gold monetisation scheme.

What is Gold Monetisation Scheme?

Gold monetisation scheme helps depositors of gold earn interest on their metal accounts. Once the gold is deposited in a metal account with a designated bank, the gold would be converted by the bank and credit would be provided to the depositor. Interest on gold 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 bank. After deposit of the gold, the bank can at its discretion, auction, sell or lend the gold. Hence, in case of deposit of jewellery, the depositor would not receive back the gold - only credit for the value of gold would be provided.

Who can Deposit Gold?

Resident Indians (Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can deposit gold under the scheme. Joint deposits of two or more eligible depositors are also allowed under the scheme and the deposit in such case would be credited to the joint deposit account opened in the name of such depositors. Gold under this scheme must be deposited in an account opened at designated branch that has implemented this scheme. While opening the account and accepting deposit, the bank would ensure that the depositor meets the KYC norms.

Accepting Deposit

The minimum deposit accepted under the scheme is 30 grams of raw gold (bars, coins, jewellery excluding stones and other metals). There is no maximum limit for deposit under the scheme. All gold deposit made under the scheme and submitted to the bank will be evaluated at designated Collection and Purity Testing Centre (CPTC). The collection and assaying centres certified by the Bureau of Indian Standards (BIS) have been notified by the Central Government for the purpose of handling gold deposited under this scheme. After submission of the gold to a bank or a designated Collection and Purity Testing Centre, the gold would be tested for purity and converted into standard gold of 995 fineness. Till the issue of deposit receipts of standard gold to the depositor and accrual of interest on the account, the gold accepted by the CPTC or the designated branch would be treated as an item in safe custody.

Types of Deposit

Deposits under the gold monetisation scheme will be categorised into one of the following three categories based on the tenure of deposit:

Short-Term

Short-term bank deposit means the deposit of gold made under the gold monetisation scheme with a designated bank for a short-term period of one to three years. Gold deposited under this scheme would be subject to a minimum lock-in period as determined by the bank. The bank can also allow for whole or part withdrawal of the deposit and fix interest rates on deposit, based on their policies. Redemption of principal and interest at maturity will, at the option of the depositor be either in Indian Rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. In case of premature redemption, the redemption would be in INR equivalent or gold, at the discretion of bank.

Medium-Term

A medium-term bank deposit means the deposit of gold made under the Gold Monetisation Scheme with a designated bank in the account of the Central Government for a medium-term period of five to seven years. The deposit under this category will be accepted by the designated banks on behalf of the Central Government. A medium term deposit can be withdrawn any time after 3 years. Further, banks can allow whole or part premature withdrawal of the deposit subject to minimum lock-in period and penalties. The rate of interest on medium term deposit will be decided by Central Government and notified by Reserve Bank of India from time to time. The current rate of interest on medium term deposit is 2.25% p.a.

Long-Term Government Deposit

Long-term bank deposit means the deposit of gold made under the gold monetisation scheme with a designated bank in the account of the Central Government for a long-term period of twelve to fifteen years. The deposit under this category will be accepted by the designated banks on behalf of the Central Government. A medium term deposit can be withdrawn any time after 5 years. Further, banks can allow whole or part premature withdrawal of the deposit subject to minimum lock-in period and penalties. The rate of interest on medium term deposit will be decided by Central Government and notified by Reserve Bank of India from time to time. The current rate of interest on medium term deposit is 2.5% p.a.

RBI Notification on Gold Monetization Scheme

The RBI notification on gold monetization scheme is reproduced below for reference: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2018/03/RBI-Notification-Gold-Monetization-Scheme.pdf" title="RBI Notification – Gold Monetization Scheme"]

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