Essential Facts of Sovereign Gold Bond and Monetization Scheme

The Union Government of India has approved the Sovereign Gold Bond and Gold Monetization scheme.in order to monetize the estimated 20,000 tonnes of gold in households and temples of India, which is neither monetized nor traded ever.

Aim of the Schemes:

– Government imports 800-1000 tonnes of gold every year. This scheme will ease pressure on Trade Deficit.
– It will scrap existing Gold Deposit and Gold Metal Loan Scheme.
– Lenders can sell their Gold to generate Foreign Currencies.
– The Government will benefit from reduction in the cost of borrowing.
– To help Gems and Jewellery sector in the country by making it available Gold as a raw material on loan.
Medium and long-term deposits can be used to replenish RBI’s gold reserves, auctioning, making coins and lending to jewellers. Short-term deposits will only be used for making coins and lending to jewellers
– The government will create a Gold Reserve Fund to bear risks arising out of variations in gold prices.

What is Sovereign Gold Bond Scheme?

– It is an alternative to purchasing Metal Gold.
– It will be the Sovereign Guarantee issued by RBI on the behalf of the Union Government.
– This will carry Fixed rate of Interest (calculated on the value of Gold at the time of investment).

Facts of Gold Bond Scheme:

– This allows the investors to earn fixed rate of interest.
– Investor can redeem Gold certificate into Money or Physical Gold.
– Annual Cap of 500 grams per person has been set.
– It will be issued for 5-7 years with lock-in period, in denominations of 2,5,10, 50, 100 grams and other denominations.

What is Gold Monetization Scheme?

– It will allow depositors to earn interest in their metal deposits and jewelers to obtain loan in their metal account..
– Bankers and Dealers will also be able to monetize the gold.
– It will regulate estimated 20,000 tonnes gold which is neither be traded or monetized in India.
Minimum 30 grams of gold has to be deposited for at least 1 year.

Facts of Gold Monetization Scheme:

– Gold bonds will be issued in denominations of 5, 10, 50, 100 grams of gold. The cap per person per year has been set at 500 grams.
– The deposits can be short term (1-3 years), medium term (5-7 years) and long term (12-15 years).
– The income will exempted from the Capital Gains tax, income tax.
– Like FD, you can break lock-in period and interest will be paid accordingly.

How Monetization will work?

There are different phases from which a depositor has to go through before opening a Gold Saving Account.
Stage-1: Customers who are willing to deposit their yellow metal, He/She has to go near Purity Test Center (PTC verified by the Bureau of Indian Standard(BIS)) has authority to test the purity of gold, where Preliminary XRF machine test (a Preliminary test to verify the quantity of gold).
Stage-2: If customer is satisfied with the test and gives his/her consent of melting the gold, a Fire Array Test will be conducted by the PTC and net weight and purity of the gold is calculated.
Stage-3: After, this PTC will give a certificate certifying the amount and purity of gold. If customer wants to take a melted gold bar, he is authorized to do so.
Stage-4: Now, the depositor has to produce the certificate at the bank so that its Gold Savings Account can be opened for the depositor and then, bank credits the quantity of gold into the depositor’s account.
After the maturity is over, the customer has right to get bullion or cash of his/her choice.

Comment:

Government of India is also working to develop Gold coins with Ashoka Chakra on its face. And, It hoped that it will reduce demand of gold coins minted outside India, and also helps in reducing the trade deficit due to tonnes of gold imported every year and recycling the gold available in the country 

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