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Gold Monetisation Scheme : Draft Details

It is no secret that we Indians love our gold. Total gold reserve held privately are estimated to be at a value around 50% of the GDP of the county. To create more liquidity in banks and to utilize these passive assets the government has proposed a draft gold monetization scheme.

The salient points of the scheme to be launched only in select cities in the beginning are as under :

  • Establishment of Purity Testing Centers : it is proposed to utilize the hallmarking centers as certified by the bureau of Indian Standards ( BIS) for this purpose
  • Examination of Gold : Upon presentation of gold for deposit under the scheme, an analysis of the jewelry, bullion etc will be performed to tell the customer the approximate amount of pure gold. Upon the consent of the customer banking KYC and melting consent will be obtained from the customer
  • Melting and Return of Jewels : Upon the receipt of assent of the customer, the jewels, if any, on the jewelry shall be removed and handed to the customer and the gold will be melted before the customers eyes.
  • Deposit : After the melting process is completed the purity of the gold is ascertained and the results are to be informed to the customer. he has a choice of either refusing to accept, in which case he can take back the melted gold in the form of gold bars, after paying a nominal fee1

    to that centre; or he may agree to deposit his gold (in which case the fee will be paid by the bank). If the customer agrees to deposit the gold, then he will be given a certificate by the collection centre certifying the amount and purity of the deposited gold. The minimum amount that a customer can deposit is 30 grams

  • Gold Savings Account : Upon acceptance the bank shall credit the quantity of gold to the customers gold savings account.
  • Interest Payment and redemption : Interest shall be paid to the customer in gold, so that the total quantity of the gold as deposited by the customer increases with accretion of interest at the rate so provided by the bank. Under the draft scheme, the customer has the option of redemption either in gold, based on the quantity so accrued in his account, or an equivalent amount of cash.
  • Tax Impact : No specific exemptions have been announced as part of the scheme, though it is hoped that such deposits will be exempt from Capital gains and income tax.

 

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Arkay and Arkay View.

In our opinion, the scheme looks good on paper. Though its true success will be determined by :

  • The interest rates offered by banks on such gold deposits
  • The tax treatment of gold so deposited in these accounts and the scrutiny , or the lack thereof, that the depositors have to contend with after making such deposits. [/su_note]

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