India Gold Monetization Scheme – Part 1 – key features

According to latest estimate, Indian consumers hold directly or indirectly 22,000 tons of Gold, almost three times the total holding of US Federal Reserve. Current value of that gold is around $800 billion or 39% of GDP.

That vast amount of capital sits idle either at bank or family lockers, producing nothing and contributing nothing.

To increase movability of the capital, Indian newly elected government has launched a new scheme to monetize this gold, naming it GMS (Gold Monetization Scheme).

Though skeptics suggest that the scheme could be a grand failure due to sentimental value of the Gold but considering the amount, even 25% mobility should be considered as success.

Key Features of the scheme -

• Gold can be deposited in any form, bullion or Jewelry. Minimum investment is 30 grams.
   
• The depositors under the scheme can choose three tenures, short term (1-3 yrs. with roll out multiple of 1 yrs. ), medium term ( 5-7 yrs.) and long term (12-15 yrs.).
   
• Short term interest rates would be up to discretion of banks and would be denominated in volumes (grams of gold). For short term customers can state their preferred withdrawal to be in gold or Rupee.
   
• Government will decide on the longer term rates and would be denominated in Rupee terms. Longer term deposits redemption would be in cash.
   
• Interest and capital gains are tax exempt.