The Prime Minister Shri Narendra Modi will launch the three Gold related Schemes i.e. Gold Monetisation Scheme (GMS), Gold Sovereign Bond Scheme and the Gold Coin and Bullion Scheme on Thursday, 5^th November, 2015 in the national capital.

The salient features of each of the aforesaid scheme are as follows:

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. 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). The deposit certificates will be issued by banks in equivalent  of 995 fineness of 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 (MLTGD). 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 for the STBD. The interest rate  in the STBD will be determined by the banks. The interest rate in the medium term bonds has been fixed at 2.25% and for the long term bonds is 2.5% for the bonds issued in 2015-16.

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 (KYC) 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.

It may be recalled that the Government of India announced the Gold Monetisation Scheme vide its Office Memorandum F.No.20/6/2015-FT dated September 15, 2015. The objective of the Scheme is to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold..

 The list of CPTCs and Refiners are certified by the Bureau of Indian Standards. Indian Banks Association has finalized the necessary documentation including the tripartite agreements between the designated banks, CPTCs and the Refiners under the Scheme. Banks have put in place the requisite systems and procedures to implement the scheme and will continue to improve them.  

Sovereign Gold Bond Scheme

The Government of India has decided to issue Sovereign Gold Bonds. The Bonds will be issued in multiple tranches subject to the overall borrowing limits of GOI. Applications for the bond under the first tranche 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 notified. It may be recalled that the Union Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold.

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. A mechanism will be put in place for internal verification of the self declarations.

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only. 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 demat 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 notified, either directly or through agents. The investors will get interest at a  fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment for the bonds issued in 2015-16.

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. Department of Revenue has agreed to ensure tax neutrality between the purchase of physical gold and investment in the gold bonds. This will require amendments in the existing provisions of the Income Tax act , which will be considered in the 2016-17 Budget. 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 & bullion is a part of the Gold Monetisation Programme. The coin will be the first  ever national gold coin minted in India and will have the National Emblem of Ashok Chakra engraved  on one side and Mahatma Gandhi on the other side . Initially the coins will be available in denominations of 5 and 10 grams. A 20 gram bullion will also be available. Initially, 15,000 coins of 5gm, 20,000 coins of 10 gm and 3,750 of  bullions of 20 gm  will be made available through MMTC outlets. The Indian Gold coin & bullion is unique in many aspects and will carry advanced anti-counterfeit features and tamper proof packaging.

The Indian Cold coin & bullion will be of 24 karat purity and 999 fineness. All coins & bullion will be hallmarked as per the BIS standards. These coins will be distributed initially through designated & recognised MMTC outlets and later through specified bank branches and post offices.