The Government has released the draft Gold Monetization Scheme (GMS). The main objective of the Scheme is to mobilized gold held by the household in lieu of interest and to make it available to the gems and jewellery sector as raw material on loan. This scheme aims at reducing reliance on import of gold to meet the domestic demand.
The draft guidelines have been released nearly three months after announcing the scheme by the Finance Minister Mr. Arun Jaitley in the Union Budget 2015.
Q 1. How much gold can be deposited in the scheme?
The minimum quantity of gold that a customer can deposit is proposed to be 30 grams. The gold can be in any form, i.e. bullion or jewellery.
Q 2. How to check the purity of gold to be deposited in the scheme?
Customer interested in depositing the gold shall get its purity tested, which shall be done at Purity Testing Centre through a XRF machine.
If customers agree with amount of pure gold determined after the purity testing, he shall fill-up a Bank/KYC form and give his consent for melting the gold.
Q 3. What is Purity Testing Centre?
There are 350 BIS certified Hallmarking Centres which are spread across various parts of the Country. Since these Hallmarking Centers are equipped to conduct a test of purity of jewellery in a short span of time, they shall act as ‘Purity Testing Centers’ for the scheme.
Q 4. In which cities God Monetization Scheme will be launched?
Initially the scheme is proposed to be launched in selected cities only. However, if the requirement arises the scheme shall be extended to other cities. Currently, it is proposed to open 331 such centers across India.
Q 5. How gold shall be melted?
The gold ornaments so collected from the customers shall be cleaned of its dirt, studs, meena, etc., which shall be handed-over to the customer only.
Net weight of the jewellery shall be taken after such removal. Thereafter, right in front of the customer the jewellery will be melted and through a fire assay, its purity will be ascertained.
Q 6. How to deposit the gold?
After determining the purity of gold by fire assay, the customer can chose to refuse to deposit the gold. In that case, he can take back the melted gold in the form of gold bars, after paying a nominal fee.
If the customer agrees to deposit the gold, he will be given a certificate by the collection centre certifying the amount and purity of the deposited gold. In this case, the melting charges shall be borne by the bank.
Q 7. How to open the gold saving account?
When the customer produces the certificate of gold deposited at the Purity Testing Centre, the bank will open a ‘Gold Saving Account’ for the customer and credit the ‘quantity’ of gold into the customer’s account. Simultaneously, the Purity Verification Centre will also inform the bank about the deposit made.
Q 8. Is interest payable on gold deposited in gold saving account?
Yes, banks will pay interest on ‘Gold Savings Account’ after 30/60 days of account opening. The rate of interest is proposed to be decided by banks directly. Both principal and interest to be paid to the depositor shall be valued in terms of gold.
Q 9. How to withdraw from gold saving account?
Customer will have the option of redemption from gold saving account either in cash or in gold. Such an option will have to be exercised at the time of making the deposit. The tenure of the deposit will be minimum of 1 year and with a roll out in multiples of one year.
Q 10. Do any capital gains arise from such transaction?
In the Gold Deposit Scheme (1999), the customers received exemption from capital gain tax. So, tax exemptions are likely to be made available for this scheme as well.
Amount earned from “Gold Saving Account” under this scheme is likely to be exempted under Income-tax Act after due examination.
Q 11. How gold so deposited shall be used by the Banks?
The banks may be permitted to utilize the gold in the following ways :
(a) Deposit the mobilized gold as part of their CRR/SLR requirements with RBI’
(b) Sell the deposited gold to generate foreign currency’
(c) God can be converted in gold coins for further sale to customers;
(d) Lending to the jewellers.
Q 12. How gold can be lent to the jewellers?
When a gold loan is sanctioned, the jewellers will receive physical delivery of gold. The banks will, in turn, make the requisite entry in the Jewellers’ Gold Loan Account. it is proposed that the interest to be charged from the jeweller shall cover the following :
(a) Interest rate paid to the depositors of gold
(b) Fee paid to the refiners and Purity Verification Centres.
(c) Profit margin of the banks