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Gold Monetisation Scheme (GMS)

Gold Monetisation Scheme was launched by Government of India in 2015; under this scheme one can
deposit their gold in any form in a GMS account to earn interest as the price of the gold metal goes up.

Background

 In Indian households, over 20,000 tonnes of gold is lying idle. To turn this unused gold into a productive
asset, the Government of India launched the Gold Monetisation Scheme (GMS).
 The scheme was launched by the Prime Minister of India in 2015 with an aim to mobilize gold and
facilitate its use for productive purposes, which further will also help in reducing India’s dependability
on gold imports.
 The scheme will also benefit jewellers by allowing them to obtain loans. Lending institutions such as
banks and NBFCs too will be able to monetise this gold.
 The government replaced the existing Gold Deposit Scheme (GDS) (1999) and Gold Metal Loan (GML)
Scheme (1998). But GMS is a combination of the best features of both the schemes.

Benefits

 Mobilise idle gold: The scheme will help in mobilizing gold that has been lying idle in the confined
spaces of households, trusts, and other institutions in India. The movement of gold in the national
market will further benefit the Indian gems and jewellery sector which is a major contributor to India’s
exports.

 Earn interest: Gold lying in your bank lockers or household does not earn you anything. In fact, when
you store gold in a bank locker, it costs you bank locker charges to keep it safe. The gold monetisation
scheme will help you earn interest on your gold deposits, which will add to your savings.

 Avail secured storage: Bank lockers are hard to get. Opening a gold deposit account with a bank will
eliminate your tension regarding gold storage. Once you deposit your gold possessions, your bank will
keep it secured and safe.

 Enjoy tax benefit: The earnings on the gold monetisation scheme are exempted from capital gains tax,
wealth tax, and income tax.

 Get flexibility on redemption: The gold depositor has the option to take either cash or gold on
redemption. However, the redemption preference has to be mentioned at the time of deposit.

 Reduce the government’s reliance on gold imports: The mobilised gold will also supplement the RBI’s
(Reserve Bank of India) gold reserves. It will also help the government in reducing the Government’s
cost of borrowing. In the long run, it is also expected to decreases India’s dependency on gold imports.

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Sovereign Gold Bonds Scheme

The government of India lately introduced Sovereign Gold Bond Schemes to offer investors another way to
own gold. SGBs are government securities and hence safe. Their value is denominated in multiples of gold
grams. This is why; it is a substitute for investing in physical gold. After redeeming the bond, they will deposit
the corpus (as per the current market value) to your registered bank account.

Who should invest in SGBs?

 People who have a penchant for gold investments can consider sovereign gold bonds.
 Those who do not want the hassle of keeping physical gold safe can also go for this. This is because it is
easy to store this in demat form, and nobody can steal it as they are in paper form.

Features

a. Eligibility criteria
Any Indian resident – individuals, Trusts, HUFs, Charitable Institutions and universities – can invest in SGB.
You may also

invest on behalf of a minor.

b. Denomination/value
The value of the bonds is assessed in multiples of gram(s) of gold, wherein the basic unit is 1 gram. The
minimum initial investment is 1 gram of gold, and the upper limit is 4 kgs of gold per investor (individual &
HUF). For entities like trusts and universities, 20 kgs of gold is permissible.

c. Tenure
The bond’s maturity period is for 8 years. However, you can choose to exit the bond from 5 thyear (only on
interest payout dates).

d. Issuance of bonds
The Bond is issued by Reserve Bank on behalf of Government of India.
e. Redemption price
The redemption price must be in INR, based on price of gold at that time.

f. Absolute safety
Sovereign gold bonds carry none of the risks that is associated with physical gold, except the market risks.
There is no hefty designing charge or TDS here. Therefore, nobody can steal it.

g. Extra income
You can earn guaranteed annual interest at the rate of 2.50% (on the issue price). This is the most recent
fixed rate.

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h. Collateral
Some banks accept SGB as collateral/security against secured loans. Hence, they will treat it as a gold loan
after setting the loan-to-value (LTV) ratio to the value of gold.

Indian Gold Coins Scheme

 The Indian Gold Coin scheme was introduced as a part of Gold Monetisation Scheme.
 It has the national emblem of Ashoka Chakra on one side and the face of Mahatma Gandhi on the
other.
 They are available in denominations of 5 and 10 grams. Bars or bullions are available in 20 grams.
 These gold coins are distributed through Metals and Minerals Trading Corporation of India (MMTC) and
can be bought at designated banks.

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