Gold Monetization means converting the country’s gold holdings into cash to spur spending and investment, and limits the need to import gold.
India has around 20,000 tons of gold lying in households and temples. That’s the same weight as around 3,300 adult elephants. Worth of gold is around $767 billion.
The government wants to unlock the earning potential of this domestic treasure trove.
The idea is to tap into the country’s idle bullion by allowing owners to deposit their stocks with banks to earn interest. The minimum deposit is 30 grams in the form of bullion or jewellery to earn tax-free interest, under the draft rules. The mobilized metal might be loaned to jewelers by the banks to make jewellery, in which case you won’t get back the same metal you put in.
If the government is able to put the stockpiles of idle gold to use, it could help curb imports, which currently stand at nearly 1,000 tons annually and reduce the country’s need for foreign exchange reserves.
The objectives of the Gold Monetization scheme are:
The draft outline of the scheme has been prepared after due deliberations and consultations with various stakeholders which include banks, refineries, hallmarking Centres, jewelers’ associations; RBI; and various government departments.
The summary of above points is depicted by a diagram given below:-
The bank will commit to paying an interest to the customer which will be payable after 30/60 days of opening of the Gold Savings Account. The amount of interest rate to be given is proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors of gold will be ‘valued’ in gold. For example if a customer deposits 100 grams of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 grams.
The rate will be set by banks. But to attract depositors, the interest rates should be “more than 4% to induce households to part with their gold
Delivery of gold to jewellers: When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from the refiners. The banks will in turn make the requisite entry in the jewelers’ Gold Loan Account.
It’s a known fact that Gold & Real Estate were safe havens to park Black Money. Gold Monetization Scheme is a good way to unlock the black money parked in the form of gold. Currently, hoarders are also finding ways to either exit or convert it into a sort of productive asset.
Gold Monetization Scheme will be sort of amnesty scheme for general public to declare unaccounted gold lying in the lockers.
For more information about Gold Monetization Scheme, visit skpatodia.in Or talk to our executive.