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November 05, 2015

Important Details you should know about 3 Gold Schemes launched by PM Modi

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To reduce physical gold demand and luring tonnes of gold from households into the banking system, Prime Minister Narendra Modi today (5th November 2015) launched three Gold related Schemes. The three schemes launched by modi are,
  1. Gold Monetisation Scheme (GMS)
  2. Gold Sovereign Bond Scheme and
  3. Gold Coin and Bullion Scheme.
Modi also unveiled the First ever national gold coin minted in India with the national emblem of Ashok Chakra engraved on it.  The schemes were proposed by Finance Minister Arun Jaitley during presentation of Union Budget this year. Prime Minister had announced about the launch of the schemes in his Mann ki Baat programme in All India Radio last month.

As these schemes are very important for Banking Exam aspirants, Let's have a close look at these schemes. 

Important Points you should know about the Gold Schemes Launched by Modi

Gold Monetisation Scheme

Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds registered
under Sebi norms) can make deposits under the scheme. The minimum deposit at any one time will be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of the precious metal of 995 fineness. There is no maximum limit for deposit under the scheme and the metal will be accepted at the Collection and Purity Testing Centres (CPTC) certified by the Bureau of Indian Standards.

Important Points to Know
  • Gold Monetisation Scheme can earn up to 2.50 per cent interest rate on their idle gold.
  • Interest rate on Medium and Long Term Government Deposit (MLTGD) are 2.25 per cent and 2.20 per cent, respectively.
  • The tenor of medium term would be between 5-7 years while long term would for 12-15 years tenure.
  • The deposit under MLTGD category will be accepted by the designated banks on behalf of the central government.
  • Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the Collection and Purity Testing Centres (CPTC) or the bank’s designated branch, as the case may be and whichever is earlier.
  • The principal and interest of the deposit under the scheme will be denominated in gold.
  • The gold received under MLTGD will be auctioned by the agencies notified by the government and the sale proceeds will be credited to government’s account held with RBI.
  • Reserve Bank of India will maintain the Gold Deposit Accounts denominated in gold in the name of the designated banks that will in turn hold sub-accounts of individual depositors

Sovereign Gold Bond

Instead of buying gold in physical form investors can park their money in bonds which are backed by gold. The bonds will be available both in demat and paper form. Sovereign Gold Bond has more or equal advantage against the physical gold. The bond will be issued by RBI on behalf of the Government of India. The bond would be restricted for sale to resident Indian entities and the maximum allowable limit is 500 grams per person per year.

Important Points to Know
  • The RBI has fixed the public issue price of sovereign gold bonds at Rs 2,684 per gram.
  • These bonds will be issued in denominations of 5, 10, 50 and 100 grams of gold or other denominations.
  • Applications for the bond will be accepted from November 5-20. The Bonds will be issued on November 26.
  • The Bonds will be sold through banks and designated post offices as may be notified.
  • The borrowing through issuance of Bond will form part of market borrowing programme of Government.
  • Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
  • Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar Card/PAN or TAN /Passport will be required.
  • The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold. Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.
  • The Bonds will be eligible for Statutory Liquidity Ratio(SLR). Commission for distribution shall be paid at the rate of 1% of the subscription amount.

Gold coins

  • The coins will be available in denominations of 5 and 10 grams. A 20 gram bar or bullion will also be available. About 15,000 coins of 5 gm, 20,000 coins of 10 gm and 3,750 gold bullions will be made available through MMTC outlets.
  • The Indian Gold coin is unique in many aspects and will carry advanced anti-counterfeit features and tamper proof packaging that will aid easy recycling.
  • These coins will be distributed through designated and recognised MMTC outlets.
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