Gold Monetization

Gold Monetization

Most of the Indian families keep gold idle at home. Although the value of gold appreciates with time, keeping gold idle at home comes at a cost. You have to pay locker fees to store your gold safely otherwise you may compromise its safety at home. But you have the option to earn interest on your idle gold along with enjoying the appreciation in the value of your gold through the  Gold Monetisation Scheme (GMS), which allows individuals/households and institutions to earn interest on their gold holding.

Benefits of Gold Monetisation Scheme

  • Depositing gold under GMS will save your locker fees and help you earn up to 2.25% interest annually.
  • You can enjoy the value appreciation of your gold and save storage cost of your physical gold. The benefits do not end here. You can also save tax as the interest earned and the capital gains on the gold deposit under the scheme are exempt from tax.

Given the above benefits, you must be excited to know more about the scheme. Here are details of the Gold Monetisation Scheme.

GMS was introduced by the government in 2015 with an aim to mobilise idle gold of Indian families and facilitate its use for productive purposes, which will also help in reducing India’s current account deficit.

In this scheme, one can deposit minimum 30 grams of raw gold in the form of bars, coins, jewellery excluding stones and other metals. There is no limit on the maximum amount of gold that you can deposit under GMS.

The deposits under GMS is held by banks on behalf of the Centre, who also decides the interest rate. The deposits have to be made at a government certified centre called Collection and Purity Testing Centre (CPTC).

CPTC will test the purity of your gold and give you a certificate, mentioning the quantity of the gold deposited by you. You can take this certificate to a bank to open an account under the scheme. The account represents the amount of gold the depositor is holding with the bank.

At the time of redemption, the depositor has the option to take either cash or gold. However, the redemption preference has to be mentioned at the time of deposit. Here you have the option to choose the tenure for which you want to deposit the gold. Longer the tenure, higher is the interest.

Short Term Gold Deposit: This is for 1-3 years. Interest rate on this scheme is decided by the bank. For example, State Bank of India offers 0.50% interest for one year, 0.55% for one to two year and 0.60% interest for 2-3 year tenure. Both the principal and interest shall be denominated in gold. You can take the interest annually or can accumulate it till maturity.

Medium Term Gold Deposit: This is for 5-7 years tenure. Interest rate offered on this scheme is 2.25%. This is paid by the bank on behalf of the government.

Long Term Gold Deposit: Minimum tenure in this scheme is 12 years and maximum tenure is 15 years. You will get an interest rate of 2.25% in this scheme.

In case of medium-term and long term deposit, the principal will be denominated in gold but the interest shall be paid in rupees annually on 31st March or cumulative interest on maturity. Interest is calculated on the gold value in rupees, at the time of deposit.

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