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PM Modi Launches 3 Gold Schemes

In a bid to rein in the gold imports and attract investors away from physical assets, PM Modi launches 3 Gold Schemes: 

  1. Gold Coin and Bullion scheme
  2. Gold Monetisation Scheme
  3. Gold Sovereign Bond Scheme

#1. India Gold Coin and Bullion scheme

  • The coin will be the first ever national gold coin minted in India and will have the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other side.
  • Initially, the coins will be available in denominations of 5 and 10 grams.
  • 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.

#2. Gold Monetisation Scheme (GMS), 2015

  • Scheme allows you to earn some regular interest on your gold and save you carrying costs as well.
  • It replaced the existing Gold Deposit Scheme, 1999.
  • It offers option to resident Indians to deposit their precious metal and earn an interest of up to 2.5 per cent.

Who can make deposits?

  • Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds registered under Sebi norms) can make deposits under the scheme.
  • 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.

#3. Sovereign Gold Bond Scheme

  • Investors can earn an interest rate of 2.75 per cent per annum by buying paper bonds.
  • Sovereign Gold Bonds will be issued in multiple tranches subject to the overall borrowing limits.
  • The bond would be restricted for sale to resident Indian entities and the maximum allowable limit is 500 grams per person per year.
  • They can be used as collateral for loans and can be sold or traded on stock exchanges

Few more things to know

  1. Minimum investment in the bond shall be 2 grams.
  2. The bonds can be bought by Indian residents or entities and is capped at 500 grams.
  3. The RBI has fixed the public issue price of sovereign gold bonds at Rs 2,684 per gram.
  4. The borrowing through issuance of Bond will form part of market borrowing programme of Government.
  5. The Bonds will be eligible for Statutory Liquidity Ratio (SLR).

Why was there a need for such schemes?

  1. To lure tonnes of gold from households into banking system.
  2. According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India.
  3. Huge gold imports pushed India’s current account deficit (CAD) to a record $190 billion in 2013, prompting the hike its duty on imports to a record 10 percent.
  4. The government wants to reduce the reliance on gold imports over time.

But, will these schemes succeed in bringing down Gold imports?

  1. Experts who believe, investors will still find 8 percent offered for bank deposits as more attractive.
  2. The present scheme will not bring out even 20 tonnes of gold.
  3. Investors fear that the tax department will hound them questioning the source of gold.

Okay! But tell me how good are they from investing point of view?

  1. A section of experts feels the interest rates being offered (on both deposits and bonds) are attractive.
  2. For people who have gold as an investment asset, it is a good opportunity to gain some interest out of it.
  3. Gold is always written off as a zero-yield instrument compared to equities, which give dividend and fixed income which gives fixed interest.

From now on, gold will not only be an instrument of security but will also give earnings and will become part of nation building.


Published with inputs from Arun


Any doubts?

  1. Siddhartha Singh

    The minimum permissible investment in the SGB scheme will be 1 gram of gold and NOT 2 grams.

Government announces third round of Gold Bond Scheme

  1. News: The govt has announced the application window for the third tranche of the Sovereign Gold Bond scheme
  2. The bonds will be sold through banks, Stock Holding Corporation of India Ltd. and designated post offices
  3. Reason: It comes at a time when prices of gold are increasing
  4. Objective: To divert investment in the gold bonds instead of gold itself, which will help in reducing India’s substantial gold imports

Read more about Sovereign Gold Bond Scheme.

Gold bond scheme picking up: Das

  1. The second tranche of the Sovereign Gold Bond (SGB) scheme has attracted applications for gold worth Rs.726 crore.
  2. The scheme is gradually picking-up amongst the investors with increase in awareness and more clarity about the provisions of the scheme.
  3. The idea behind the SGB scheme is to wean away those who use gold as a store of value.
  4. It encourages them to invest in the gold bonds as opposed to the yellow metal itself.
  5. The bonds are issued by the Reserve Bank of India on behalf of the govt.

Government clears two gold schemes

The government plans to exempt capital gains made at the time of redemption of gold under the Gold Bond Scheme.

  1. Two schemes are the Sovereign Gold Bond Scheme and the Gold Monetisation Scheme.
  2. It could bring an estimated 20,000 tonnes of idle gold lying with Indian consumers into the economy and also reduce India’s dependence on gold imports.
  3. In Gold Monetisation Scheme, gold in any form can be deposited with banks for a period of one to 15 years. This gold will earn interest and redemption will be at the prevailing market value at the end of the tenure of deposit.
  4. Sovereign Gold Bond Scheme is aimed at customers looking to buy gold as an investment.
  5. While the gold deposited with banks under the monetisation scheme will be allowed to be sold to jewellers in order to boost domestic supply.

The new gold monetisation scheme

  1. Gold Monetisation Scheme is fairly a good move to reduce GoI India’s gold import.
  2. Under the scheme, either individual or institutions can keep their gold deposits with the bank and bank in-return gives them interest.
  3. The RoI (rate of interest) is yet to be decided, but experts say it should be around 5 to 6%.
  4. Similar scheme was launched in 1999 but could not yield the desired result due to inherent problems.

:( We are working on most probable questions. Do check back this section.

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