This high import is not good for our nation as it adds financial burden to our country. High import of gold also forces the Indian government to levy high import duties. Our Government has decided to convert the gold of our country into cash. Indian institutions or households hold approx 20K tons of gold that has total value of $1 trillion. This total value of gold makes up more than fifty percent of Gross Domestic Product of our nation.
Pradhan Mantri Gold Monetization Scheme was announced on 5th November 2015 during union budget. This can be very useful scheme for gold owners. It helps you earn interest on your unused gold. This can be a new deposit tool that ensures mobilization of your gold lying idle in bank lockers. Gold owners (various families, households and institutions) just need to approach a bank to get their gold saving account opened.
What is gold monetisation scheme?
Pradhan Mantri Gold Monetization Scheme will turn your gold into productive asset in our country India. This scheme is the modification of GDS and GML. This new Gold Monetisation Scheme will replace the existing GDS. Gold owners just need to open their gold saving a/c and hand over their gold to assaying centres which assesses the gold’s purity and give a receipt to gold owner. Banks will be informed with real value of your gold by assaying centres. The value of your gold will be credited to your gold saving account by bank.
Banks collect the gold deposited by gold owners and send it to refineries. The gold will be melted and turned to gold bricks. Bank can use this gold to loan out it to jewellers who will repay the interest to banks. This is like an investment account for a gold owner. There is a maturity period. Once this period is over, bank would return the gold to gold owner along with fixed interest. The interest would also be paid out in gold. Pradhan Mantri gold Yojana can be very beneficial for gold owners.
What are the different ways in which the bank can use the gold reserves?
Bank can lend gold to jewellers: This is very obvious way. Bank can lend gold to jewellers and earn a fix interest on that gold lending. This can also reduce the total gold import and helps reduce CAD of government. The Current Account Deficit occurs when imported goods/services value is greater than exported goods/services value. The Current Account Deficit means country is using international financial help to operate. CAD is like liability that needs repayment. Reducing CAD is good for economy so announcement of this scheme for the good economy of India.
Bank can sell gold to foreign countries: Bank can sell out gold reserves to foreign countries. This can be the best way to invite foreign currency in the form of earnings.
Deposit allowed under Pradhan Mantri Gold Yojana:
A gold owner can deposit gold for long, medium or short terms under this scheme.
The tenure for long term deposit:1-3 years
The tenure for medium term deposit:5-7 years
The tenure for short term deposit: 12-15 years
Pradhan Mantri Gold Yojana eligibility:
All Indian citizens can invest in this scheme. This Pradhan Mantri gold Yojana accepts minimum 30 gram of gold in form of jewellery, coin or bar. There is no maximum limit of gold investment under Pradhan Mantri gold Yojana. It permits premature withdrawal after minimum lock-in-period but you have to pay penalty for it. All commercial banks can implement this scheme. You will get 2.5% interest annually which is more than previous gold investment schemes.
Benefits of investing in Pradhan Mantri Gold Monetization Scheme:
An investor can enjoy lots of benefits on investing in Pradhan Mantri gold bond scheme. He/she can earn interest (2.5%) on his/her idle gold. It can add more value to your savings. It helps reduce gold import and provide lots of benefits to country. This is a flexible scheme as you can withdraw your gold when you need it.
How Pradhan Mantri Gold Monetization Scheme works?
The whole process is similar to normal banking process. Interested jewellers or households have to deposit their gold. Gold owners will be informed about the exact value of their gold after using preliminary test. Once customers or gold owners get satisfied with gold value, they have to fill KYC form to give consent of melting their gold. If gold owners are not satisfied with pure gold value calculated after gold purity test, they can take their gold back. Fire essay test is conducted after preliminary test. Customers will get a certificate that contains the purity information and amount of gold. Bank opens a gold saving account for customers.
Sovereign Gold Bond
Investors can park their money in the form of bonds instead of buying gold. This bond will be available in form of paper or demat. This bond will be issued by RBI and it is equally beneficial as physical gold.
Conclusion:
The Pradhan Mantri Gold Monetization Scheme was launched to attract the 20K tons of gold saved in Indian temples, institutes and households into banking system. This scheme can attract 400 gm of gold in first 2 weeks this can be like poor response to Pradhan Mantri Gold Monetization Scheme. Indian Government has been announcing various steps for long time to make the Pradhan Mantri Gold Monetization Scheme more attractive and beneficial for gold owners.
These important steps include removal of capital gain and much more. This scheme can be successful with the proper support from commercial banks. Indian Government may decide to pay some incentives to banks as well.
