On September 9, 2015, the Union Cabinet presided by the Prime Minister Narendra Modi, gave its approval for launching Gold Monetization Schemes (GMS) which was announced in the Union Budget.
Gold Monetization Schemes is a new gold scheme which has modified the Gold Deposit Scheme (GDS) and the Gold Metal Loan Scheme (GML) with a purpose to mobilise idle gold possessed by people in the country for supplementing RBI's gold reserve.
The objective of introducing the modifications in the schemes is mainly to mobilized gold also to supplement RBI's gold reserves and will help in reducing the government's borrowing cost.
The changed Gold Deposit Scheme (GDS) as well as the Gold Metal Loan (GML) Scheme consists of amends in the scheme guidelines only. The risk of gold price changes will be borne by the Gold Reserve Fund that is being created.
A Gold Savings Account may be opened by consumers any time, along with KYC norms, if required. This account would be denominated in grams of gold.
The deposits under this scheme can be attained for a short-term period of 1 to 3 years (with a roll out in multiples of one year); a medium-term period that will last between 5 to 7 years and a long-term period that may last between 12 to 15 years. Similar to a fixed deposit, breaking of lock-in period will be permitted in either of the options but a penalty will be charged in the case of a premature redemption which also includes partial withdrawal.
In the case of short-term period the interest rate may be fixed by the banks but based on the prevailing international lease rates, costs, even market conditions etc. with denomination in grams of gold. For the medium and long-term deposits, the rate of interest (and fees to be paid to the bank for their services) will be issued by the government, with consultation with the RBI from over time. The interest rate for the medium and long-term deposits will be denominated and payable in rupees, on the basis of the deposited gold.
Short term deposits: The customer will has the option of redemption, for the principal deposit and interest earned, either in cash (in equivalent rupees of the weight of deposited gold at the prices prevailing at the time of redemption) or in gold (of the same weight of gold as deposited), which will have to be exercised at the time of making the deposit. The change in the option, is allowed at the bank's discretion.
The deposited gold will be utilized in the following ways:-
For medium and long-term deposit:
From 26 March 2025, the Government of India has discontinued the Medium Term Government Deposit (MTGD) and the Long Term Government Deposit (LTGD). Individuals can only open the Short Term Bank Deposit (STBD) which is for a duration of one to three years.
The objective of Gold Monetization Scheme is to mobilise gold lying in the house, reduce the import of gold, and improving gold jewellery sector by providing access to gold loans from banks.
Prime Minister Mr. Narendra Modi gave approval to launch Gold Monetisation scheme on 9 September 2015.
The Gold Monetisation is backed by Central government. It guarantees safety of gold held by authorised banks.
The minimum deposit under the Gold Monetization scheme is 10 grams of raw gold at one time. There is no maximum limit for depositing of gold under this scheme.
The benefits of Gold Monetization Scheme include earning interest on idle gold, security of gold, no tax on capital gains, and flexibility in redemption.
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