With
an objective to check import of gold, the Indian government is launching four gold related investment schemes with different
features.Indian society is obsessed with gold. No wonder India is the world's largest consumer of the yellow metal. The schemes will open on November 5, 2015
Gold
Monetisation Scheme (GMS), 2015
The
GMS will replace the existing Gold Deposit Scheme, 1999. However, the deposits
outstanding under the Gold Deposit Scheme will be allowed to run till maturity
unless the depositors prematurely withdraw them.
Resident
Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds
registered under SEBI (Mutual Fund) Regulations and Companies) can make
deposits under the scheme. The minimum deposit at any one time shall be raw
gold (bars, coins, jewellery excluding stones and other metals) equivalent to
30 grams of gold of 995 fineness. There is no maximum limit for deposit under
the scheme.
The
gold will be accepted at the Collection and Purity Testing Centres (CPTC)
certified by Bureau of Indian Standards (BIS) and notified by the Central
Government under the Scheme. The deposit certificates will be issued by banks
in equivalence of 995 fineness of gold. The principal and interest of the
deposit under the scheme will be denominated in gold. The designated banks will
accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as
well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit
Schemes. While the former will be accepted by banks on their own account, the
latter will be on behalf of the Government of India. There will be provision
for premature withdrawal subject to a minimum lock-in period and penalty to be
determined by individual banks.
Interest
on deposits under the scheme will start accruing from the date of conversion of
gold deposited into tradable gold bars after refinement or 30 days after the
receipt of gold at the CPTC or the bank’s designated branch, as the case may be
and whichever is earlier. During the period from the date of receipt of gold by
the CPTC or the designated branch, as the case may be, to the date on which
interest starts accruing in the deposit, the gold accepted by the CPTC or the
designated branch of the bank shall be treated as an item in safe custody held
by the designated bank.
The
Short Term Bank Deposits will attract applicable Cash Reserve Ratio (CRR) and
Statutory Liquidity Ratio (SLR). However, the stock of gold held by the banks
will count towards the general SLR requirement. The opening of Gold Deposit
Accounts will be subject to the same rules with regard to customer identification
as are applicable to any other deposit account.
The
designated banks may sell or lend the gold accepted under STBD to MMTC for
minting India Gold Coins (IGC) and to jewellers, or sell it to other designated
banks participating in GMS. The gold deposited under MLTGD will be auctioned by
MMTC or any other agency authorised by the Central Government and the sale
proceeds credited to the Central Government’s account with the Reserve Bank of
India. The entities participating in the auction may include the Reserve Bank,
MMTC, banks and any other entities notified by the Central Government. Banks
may utilise the gold purchased in the auction for purposes indicated above.
Designated banks should put in place a suitable risk management mechanism, including
appropriate limits, to manage the risk arising from gold price movements in
respect of their net exposure to gold. For this purpose, they have been allowed
to access the international exchanges, London Bullion Market Association or
make use of over-the-counter contracts to hedge exposures to bullion prices
subject to the guidelines issued by the Reserve Bank.
Complaints
against designated banks regarding any discrepancy in issuance of receipts and
deposit certificates, redemption of deposits, payment of interest will be
handled first by the bank’s grievance redress process and then by the Reserve
Bank’s Banking Ombudsman.
Sovereign
Gold Bond Scheme
The
Reserve Bank of India, in consultation with Government of India, has decided to
issue Sovereign Gold Bonds. Applications for the bond will be accepted from
November 05, 2015 to November 20, 2015. The Bonds will be issued on November
26, 2015. The Bonds will be sold through banks and designated post offices as
may be notified. The borrowing through issuance of the Bond will form part of
market borrowing programme of the Government of India.
Sovereign
Gold Bond will be issued by Reserve Bank India on behalf of the Government of
India. The Bonds will be restricted for sale to resident Indian entities
including individuals, HUFs, trusts, Universities, charitable institutions. The
Bonds will be denominated in multiples of gram(s) of gold with a basic unit of
1 gram. The tenor of the Bond will be for a period of 8 years with exit option
from 5th year to be exercised on the interest payment dates. Minimum
permissible investment will be 2 units (i.e. 2 grams of gold).The maximum
amount subscribed by an entity will not be more than 500 grams per person per
fiscal year (April-March). A self-declaration to this effect will be obtained.
In
case of joint holding, the investment limit of 500 grams will be applied to the
first applicant only. The Bonds will be issued in tranches. Each tranche will
be kept open for a period to be notified. The issuance date will also be
specified in the notification. Price of Bond will be fixed in Indian Rupees on
the basis of the previous week’s (Monday–Friday) simple average of closing
price of gold of 999 purity published by the India Bullion and Jewellers
Association Ltd. (IBJA). Payment for the Bonds will be through electronic
funds transfer/cash payment/ cheque/ demand draft. The investors will be issued
a Stock/Holding Certificate.
The
Bonds are eligible for conversion into de-mat form. The redemption price will
be in Indian Rupees based on previous week’s (Monday-Friday) simple average of
closing price of gold of 999 purity published by IBJA. Bonds will be sold
through banks and designated Post Offices, as may be notified, either directly
or through agents. The investors will be compensated at a fixed rate of 2.75
per cent per annum payable semi-annually on the initial value of investment.
Bonds
can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set
equal to ordinary gold loan mandated by the Reserve Bank from time to time.
Know-your-customer (KYC) norms will be the same as that for purchase of
physical gold. KYC documents such as Voter ID, Aadhaar Card/PAN or TAN
/Passport will be required. The interest on Gold Bonds shall be taxable as per
the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax
shall also remain same as in the case of physical gold. Bonds will be tradable
on exchanges/NDS-OM from a date to be notified by RBI. The Bonds will be
eligible for Statutory Liquidity Ratio(SLR). Commission for distribution shall
be paid at the rate of 1% of the subscription amount.
Gold
Coin/Bullion Scheme
The
Indian gold coin is a part of the Gold Monetisation Programme. The coin will be
the first ever national gold coin and will have the National Emblem of
Ashok Chakra engraved on one side . Initially the coins will be available
in denominations of 5 and 10 grams. A 20 gram bar/bullion will also be
available. Initially, 15,000 coins of 5gm, 20,000 coins of 10 gm and 3,750 Gold
bullions will be made available through MMTC outlets. The Indian Gold coin is
unique in many aspects and will carry advanced anti-counterfeit features and
tamper proof packaging that will aid easy re-cycling.
The
Indian Cold coin will be of 24 karat purity & 999 fineness. All coins will
be hallmarked as per the BIS standards. These coins will be distributed through
designated & recognised MMTC outlets.
Pic courtesy: MMTC
