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Recurring Gold Deposit Scheme

Gold has always been considered a safe investment option, with countries and individuals trying their best to stock up on it. Today, given the unpredictability surrounding our economy, gold is perhaps the most sought after investment instrument, especially in the light of the recent Demonetization Policy implemented by the Government of India. While Indians are known for their love for gold, a large number of us do not view gold as a proper tool of investment, with a majority of us purchasing it as ornaments to hand down from generation to generation. This viewpoint, however, is changing, with people realizing the importance of gold as a tool in their investment portfolio.

Indians account for a huge portion of global gold consumption, but the country is still heavily dependent on imports to meet demands. Given this appetite for gold, the government is keen to provide an opportunity for those who wouldn’t be able to afford it otherwise. With gold prices linked to the market and the fact that rates have increased steadily over the last year, gold has become too expensive for most rural Indians, who have lost out on a great investment opportunity.

Invest in Gold Deposit Scheme

The Recurring Gold Deposit Scheme is an idea which is the Finance Ministry is currently considering, wherein the government aims to provide individuals who cannot afford gold an opportunity to invest small amounts to capitalize on the growth gold gives. The scheme, which is yet to be implemented, would enable millions of Indians to open a gold recurring deposit account in post offices or banks, post which they can invest depending on their requirements.

Target Audience of Recurring Gold Deposit Scheme

The Recurring Gold Deposit Scheme aims to provide an investment opportunity to individuals who cannot afford to buy gold on account of the high prices. Given the fact that 1 gram of gold costs over Rs.3,000 (as of November 2016), a number of people find it too expensive. This scheme is intended to provide such members of the society an option to invest smaller amounts, targeting rural India and those who belong to lower income groups.

Additionally, it also provides an opportunity for housewives and students to become a part of the investment world by spending small amounts on a regular basis.

Quantum of Investment for Recurring Gold Deposit Scheme

The scheme, if implemented, would provide an opportunity for investors to spend anywhere between Rs.300 and Rs.500 a month towards the deposit. Individuals who can afford more could increase the amount, but the minimum investment criteria is likely to be around the Rs.300 mark each month. This amount should provide an opportunity for thousands of Indians to be a part of the gold dream.

Working of Recurring Gold Deposit Scheme

The following steps will help us understand how the Recurring Gold Deposit Scheme works.

  1. Interested individuals can open a Recurring Gold Deposit account in relevant banks/post offices.
  2. Once an account is open, one can choose to deposit a sum every month. The minimum investment amount is likely to be Rs.300 per month. Individuals who can afford more can invest higher amounts.
  3. The amount invested each month will be used as an equivalent to gold, with the gold credited in grams or their decimal equivalent.
  4. Each investment provides individuals an opportunity to increase their gold equivalent.
  5. The gold adds up with each investment, until maturity.
  6. On maturity of the account, the account holder will be paid an amount which is equivalent to the value of gold which is credited into the account. This price will reflect the price of gold on maturity.

Recurring Gold Deposit Scheme Interest

There will be no interest component in this scheme, with only the actual value of gold paid on maturity.

Importance of Recurring Gold Deposit Scheme in Rural India

This scheme will provide scores of Indians from rural areas an opportunity to capitalize on the benefits of gold. While they would not physically own gold, they will be paid an amount equivalent to the gold weight accumulated in their account. The fact that they wouldn’t need to dig into their savings to buy gold makes it ideal for individuals with limited resources. Additionally, since gold is considered a safe investment, this scheme ensures that limited financial means do not play spoilsport, boosting the economy and helping members grow their money over the years.

Implementation of Recurring Gold Deposit Scheme

The Recurring Gold Deposit Scheme is yet to be implemented, with things in the planning stage. We could expect this scheme to be implemented once all formalities and ground work are completed, with experts of the opinion that the year 2017 could see this scheme being thrown open to the public. Also, once implemented, it is expected to be renamed as the “Sukanya Swarna Jama Yojana”.

Recurring Gold Deposit Scheme Vs Gold Bonds

The table highlights the differences between these two schemes.

Parameter Recurring Gold Deposit Scheme Gold Bonds
Target audience Small depositors and individuals from rural India Individuals with a means to afford gold
Minimum investment amount (Rs.) Rs.300 (tentative) Amount equivalent to 1 gram of gold
Interest No interest will be paid 2.75% p.a.
Term 10 years (tentative) 8 years

The Recurring Gold Deposit Scheme could change the way millions of Indians look at gold, helping them cash in on the gold rush.

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