In an attempt to breathe life into the struggling Gold Monetisation Scheme (GMS), the Reserve Bank of India (RBI) has eased the process for depositors to surrender their Gold holdings. RBI has liberalised the GMS, 2015, permitting depositors to directly hand over their bullion to banks, refiners or Collection and Purity Testing Centres (CPTCs). This eliminates the previous requirement for Banks, CPTCs and Refineries to sign a tripartite agreement for this purpose. Hence, Temples, High Networth Individuals (HNIs), as well as establishments like fund houses, trusts and even government entities would benefit from dealing directly with banks, rather than CPTCs.
Understanding the Gold Monetisation Scheme
The GMS was initiated in November 2015, along with sovereign gold bonds and India gold coins. It is designed to benefit gold depositors as they can earn interest on their metal accounts. Once the gold is transferred to a metal account, it starts accruing interest. The scheme offers a 2.25% annual interest for a short-term deposit of one to three years. Medium- to long-term deposits yield a higher rate at 2.5%.
Objective of the Scheme
The core aim of the scheme is to leverage the gold held by households and institutions within the country for productive use. In the long term, this could lead to a reduction in the country’s current account deficit by reducing reliance on gold imports to meet domestic demand. A Sovereign Gold Bond Scheme – an alternative to purchasing physical gold, and the development of Indian Gold Coin was also announced in tandem with GMS.
Procedure for Deposits
Banks have been authorized to accept gold deposits at designated branches, primarily from larger depositors. The RBI has further relaxed regulations under the scheme permitting banks, at their discretion, to allow depositors to directly deposit their gold with the refiners. This provision is also beneficial for temples, which are estimated to hold around 4,000 tonnes of gold and can make deposits in bulk under the scheme.
Depositor Concerns
A number of depositors had previously expressed dissatisfaction because banks were not showing interest in accepting deposits under GMS in many cities, even for large deposits. Banks have made minimal efforts to publicize GMS. The RBI has ordered that banks must identify branches across all states and union territories that can accept deposits. All designated banks are now required by RBI to adequately publicise the scheme through their branches, websites and other channels.
| Gold Monetisation Scheme (2015) | Key Details |
|---|---|
| Short-term deposit interest rate | 2.25% annually |
| Medium-term deposit interest rate | 2.5% annually |
| Major Gold Depositor | Temples (around 4,000 tonnes) |
The Background of the Scheme
Over the past four years, the GMS scheme has managed to gather only about 16 tonnes of gold as deposits. This low figure can be attributed to both banks’ lack of enthusiasm towards the scheme and the practical complexities banks faced in dealing with collection-hallmarking centres. Under the current scheme, customers initially have to approach CPTCs approved by the Bureau of Indian Standards. These centres issued a purity certificate for the deposited gold, which the bank used to open a deposit account and credit the gold. CPTCs then dispatched the gold to a refinery for a final purity evaluation, and it was then converted into bars.
