Govt. amends Gold Monetisation Scheme to attract investors

Govt. amends Gold Monetisation Scheme to attract investors

Governement of India had issued Gold Monetisation Scheme (GMS) on November 5^th, 2015. The scheme was launched with an aim to curb gold imports, and bring down the country's current account deficit. Thereafter a number of modifications have been made in the scheme to facilitate monetisation

of gold by people. The Scheme has been further modified on April 1, 2016 vide CIRCULAR NO. DBR.IBD.BC.89/23.67.001/2015-16, DATED 31-3-2016. The amended scheme permits redemption of principal amount of gold deposited under Medium and Long Term Government Deposits (MLTGD) at the option of depositor either in INR equivalent of the value of deposited gold or in gold. Terms for Short Term Bank Deposit (STBD) the redemption in gold was already permitted. The modification will make the scheme more attractive for potential depositors, who have shown little interest in it. Changes relating to redemption of deposits have been discussed hereunder:

Existing scheme

  1. Redemption in terms of Gold available only in case of Short term deposits: Under extant scheme, the option of redemption of the deposit including interest accrued is available only under the Short Term Bank Deposit.

  2. Medium and Long term deposit: Under extant scheme, Medium and Long term deposit is allowed to be redeemed only in Indian Rupee equivalent of the value of the gold.

  3. Interest calculation: Accumulated interest is as per the price of gold prevailing at the time of redemption.

Modified Scheme

  1. Now Medium and long term deposits can be redeemed in terms of Gold: The amended scheme provides an option to the depositor to redeem Gold deposited held under the Medium and Long term Government Deposits (MLTGD), the depositor will provided an option to redeem the principal amount either in Indian Rupee equivalent of the value of deposited gold at the time of redemption or in terms of gold.

  2. Levy of admintistrave charge @ 0.2% of redemption amount: Where redemption of the deposit is in terms of gold, an administrative charge at a rate of 0.2% of the notional redemption amount in terms of INR shall be collected from the depositor.

  3. Interest Calculation: Interest accrued on Medium and Long term Government Deposits (MLTGD) shall be calculated with reference to the value of gold in terms of Indian Rupees at the time of deposit and will be paid only in cash.