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Gold Monetisation Scheme, Objectives, Features, Benefits

Gold Monetisation Scheme

The Gold Monetisation Scheme is a program launched in November 2015 by the then Minister of Finance, Late Shri Arun Jaitley, under the Ministry of Finance. The objective of the scheme is to mobilize the idle gold resources held by individuals and institutions in the country and put them to productive use.

The scheme allows individuals and entities to deposit their idle gold, such as jewellery, coins, or bars, with authorized banks in exchange for interest-bearing certificates or interest payments. The deposited gold is then utilized by the banks for various purposes, such as lending, investment, or meeting the domestic gold demand. This scheme aims to reduce the country’s reliance on gold imports, promote financial inclusion, and utilize the gold holdings for productive economic purposes.

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Gold Monetisation Scheme Objectives

The Gold Monetisation Scheme aims to achieve the following objectives:

Utilizing Idle Gold Resources

Encourage individuals and businesses to deposit their idle gold holdings, which are currently sitting unused in homes and businesses, and put them to productive use.

Reducing Dependency on Imported Gold

Decrease India’s reliance on imported gold by promoting the monetization of domestic gold holdings. This helps in reducing import expenses associated with gold and contributes to a more balanced current account.

Enhancing Availability of Raw Material

By mobilizing idle gold resources, the scheme aims to make gold readily available as a raw material. This availability supports the local gem and jewellery industries, ensuring a consistent supply of gold for their production needs.

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Gold Monetisation Scheme Features

The Gold Monetisation Scheme offers several features to the general public, encouraging them to deposit their gold in banks:

Feature Details
Interest Earning Opportunity Individuals can earn interest on their idle gold instead of keeping it at home.
Participation of Scheduled Commercial Banks All scheduled commercial banks, except regional rural banks, can execute this scheme as per RBI guidelines.
Authorized Gold Depository Facilities Individuals can deposit their gold through BIS-certified collection and purity testing facilities.
Gold Savings Account Anyone can open a Gold Savings Account at recognized banks known as Certified Purity Testing Centers (CPTCs).
Minimum Deposit Requirement Gold must be deposited in increments of at least 30 grams, with no maximum limit.
Joint Deposits Allowed Joint deposits are permitted with a minimum of two holders and an unlimited maximum number of holders.
Variable Interest Rates The interest rate offered ranges from 2.25% to 2.5% depending on the duration of the deposit.
Early Withdrawal Provision Early withdrawal is allowed, subject to an Early Withdrawal Penalty and a specific lock-in period.
Categorization by Time Period The scheme categorizes deposits into short-term (1-3 years), medium-term (5-7 years), and long-term (12-15 years).
Redemption Options Only long-term deposits can be redeemed for cash at maturity, while short- and medium-term deposits can be redeemed for cash or gold.
Government Benefits Banks accept both short-term and long-term deposits to benefit the Indian government.

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Gold Monetisation Scheme Benefits

The Gold Monetisation Scheme offers several benefits that can help address various economic challenges and provide advantages to depositors:

Reducing Current Account Deficit (CAD)

By encouraging individuals to deposit their gold instead of importing more, the scheme helps lower the expenses associated with gold imports, which in turn contributes to reducing the CAD.

Mitigating the Impact of Gold Imports on CAD

When combined with the import of crude oil, gold imports can significantly impact the CAD. This scheme helps alleviate the pressure on CAD by reducing the need for additional gold imports.

Curbing Speculative Buying

The scheme provides an alternative avenue for individuals to monetize their gold holdings, thereby reducing speculative buying of gold. This helps stabilize the gold market and prevents excessive price fluctuations.

Addressing Uncertainty and Inflation

During times of uncertainty, such as the effects of COVID-19, the demand for gold tends to increase. The scheme offers individuals an opportunity to earn interest on their gold, which can incentivize them to deposit their gold instead of hoarding it, thereby addressing the increased demand and potential inflationary pressures.

Earning Interest to Offset Depreciation

Gold is subject to price fluctuations and depreciation over time. By depositing gold under this scheme, individuals have the chance to earn interest, which can help offset the expense associated with the depreciation of the gold value.

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Gold Monetisation Scheme UPSC 

The Gold Monetisation Scheme holds significance for the UPSC (Union Public Service Commission) examination as it aligns with several key aspects of the UPSC Syllabus, making it relevant for aspirants preparing for the exam. The scheme relates to topics like the economy, international trade, and finance, which are covered under the UPSC syllabus for subjects such as Economics, General Studies, and Current Affairs. Candidates can enhance their preparation by accessing UPSC Online Coaching platforms and practising UPSC Mock Test to gain in-depth knowledge and improve their analytical skills on this topic and related subjects.

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Gold Monetisation Scheme FAQs

What is the interest rate for gold monetisation scheme?

The interest rate for the Gold Monetisation Scheme ranges from 2.25% to 2.5% depending on the duration.

Who can deposit under gold monetisation scheme?

Individuals, trusts, universities, and other entities can deposit under the Gold Monetisation Scheme.

Is gold monetisation scheme good?

The suitability of the Gold Monetisation Scheme depends on individual financial goals and preferences.

Is gold monetization scheme taxable?

The interest earned under the Gold Monetisation Scheme is taxable as per income tax regulations.

Which gold scheme is best?

The best gold scheme depends on an individual's investment objectives and risk tolerance.

Is gold better than FD?

The comparison between gold and FD (Fixed Deposit) depends on individual financial goals and market conditions.

Why is tanishq gold so expensive?

The price of Tanishq gold jewelry can be influenced by factors such as design, craftsmanship, purity, brand value, and market demand.

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