Gold is one of the most valuable elements found in our blue planet. Throughout history, we've admired gold and used it as a medium of exchange.
Furthermore, gold is treated as a commodity in the market and has an inverse relationship with a country's local currency. Meaning, if a country is importing a large amount of gold, then the value of its currency must be going down.
But, owning gold is a hectic task because it requires a lot of security. This is the reason people who purchase gold are on the lookout for a place to store it. However, if you go to a bank for safekeeping your gold, they’ll charge amount for the security they provide, along with maintenance charges.
So, a question pops-up in our mind- “Is there a way to avoid these charges?” Well, it turns out there is.
It is called GMS or Gold Monetization Scheme.
What’s Gold Monetization Scheme?
Gold Monetization Scheme was introduced back in 2015 by the Government of India. Aimed at turning idle gold into a valuable asset, the scheme was initially introduced as a replacement for the former GDS (Gold Deposit Scheme) and GML (Gold Metal Loan) scheme. However, it was later clarified by RBI that Gold Monetization Scheme would be an improved version of both the Gold Deposit Scheme and Gold Metal Loan.
The scheme is greatly helpful for reducing India's dependability on gold imports, along with helping banks and NBFCs to monetize the idle gold of our country, which weighs over 20 thousand tonnes.
“But what’s in it for me?”- You may ask.
Well, with GMS, you can forget about the hustle you need to do to get bank lockers. You can easily deposit your gold under this scheme. Furthermore, you'll be paid interest in depositing your gold. The interest amount will proportionally increase with the price of gold in the market.
Also, it should be noted that banks will not store your gold. They'll convert them into gold coins and send it to Metals and Minerals Trading Corporation of India (MMTC), or sell it to other banks or jewelers.
Thus, you shouldn’t deposit the gold items that are valuable to you emotionally.
Gold Deposit Scheme (1999)
Gold Deposit Scheme (GDS) was introduced on September 14th, 1999. The scheme had similar motives as the GMS scheme, but the Gold Deposit Scheme suffered from some drawbacks. What were those, let's find out.
- Gold Deposit Scheme was highly inconvenient to implement for several banks back in 1999. Hence only fewer banks were providing this scheme.
- Under the Gold Deposit Scheme, the minimum tenure limit was 3-7 years. This created problems for people who’d wanted to withdraw their gold earlier at their convenience.
- Gold Deposit Scheme of 1999, restricted mutual funds to invest.
Gold Deposit Scheme saw several modifications when it was relaunched in 2013, but the scheme still required some updates. Hence, the reason Gold Monetization Scheme was introduced in 2015.
How to apply for Gold Monetization Scheme?
To apply for Gold Monetization Scheme, we can contact our bank. They’ll provide us with a gold savings account, which will be used for storing our physical gold like jewelry.
Following are some of the prerequisites that you require to have this account:
Know Your Customer (KYC)
You'll be asked for your KYC details by the bank. For this, you can provide any proof of identification as suggested by your bank.
Certificate of purity
A Collection and Purity Testing Center (CPTC) will assign you this certificate. They’ll perform some X-Ray diffraction tests on your gold to test its purity, along with measuring its weight. Once this is done, they'll provide an official receipt stating both quantity and quality of the gold you own.
Your bank will provide you with a final deposit certificate after you submit your CPTC receipt to them. The final deposit certificate will contain all the information related to your gold deposit. There are over 330 CPTCs approved across the country which you can choose from.
Features of Gold Monetization Scheme
The following are some features of GMS, which you should consider before depositing your gold.
- The scheme is applicable only for depositing raw gold like gold coins and gold bars.
- Minimum 30 grams of gold is necessary to apply for this scheme, and there’s no maximum limit for investment.
- Short-term, Medium, and Long-term deposits are possible with this scheme, each with tenure of 1-3 years, 5-12 years and 12-15 years respectively.
- Pre-mature withdrawal is allowed, but it would result in a penalty.
- Gold Deposit rate of up to 2.50%/year will be provided to the depositor under this scheme. However, Gold Deposit rate for various tenures may vary from banks to banks. Thus, it is advisable to consult your bank about Gold Deposit rate, before investing under this scheme.
- The capital gains under this scheme will be exempted from income tax, wealth tax, and capital gains tax.
Advantages of Gold Monetization Scheme
By investing in the Gold Monetization Scheme, you can:
- Earn interest and make profits on the gold sitting at your home.
- At the end of your account's tenure, you can make withdrawals in the form of money or physical gold. By physical gold, I mean in the form of gold coins or bars with 99.5% purity. As discussed above, keep in mind you won't get your actual gold back in the way you've deposited it.
- Gold Monetization Scheme is introduced with a significant purpose of eliminating our country's dependence on gold imports.
- It is a flexible scheme which allows you to make withdrawals whenever you need it.
Overall this is a great scheme which can help in strengthening our country’s economy.
We Indians are known for our love of gold. Whether it’s a marriage anniversary or some festival or even a party, it is said to be incomplete without the inclusion of gold or gold coins per se. Thus, gold has become an essence for occasions like these.
However, in the aftermath of these occasions, the same gold is secluded from our daily lives. We rarely touch it, and it is kept idle in our lockers without any purpose.
So, don’t you think it is better to make use of that gold rather than just keeping it?