The Finance Ministry has moved a Cabinet note on the proposed gold monetisation scheme that will enable depositors to earn interest on their on their gold accounts.
"A cabinet note on the gold monetisation scheme has been prepared. It has been circulated for inter-ministerial comments," sources said.
Also read: Gold Monetisation Scheme: Interest on Deposits to be Tax-Exempt
The gold monetisation scheme, which is proposed to be initially introduced only in selected cities, was announced in the Budget this year by Finance Minister Arun Jaitley.
Under the proposed scheme, a person or entity would be allowed to deposit a minimum quantity of 30 grams of gold in any form, bullion or jewellery, for one year in a gold saving account. The banks will decide the interest rate.
To make the scheme attractive to households, the interest earned on it will likely be exempt from income tax, wealth tax and capital gains tax.
Before depositing gold into a metal account, customers will have to get its purity checked from the testing and collection centres certified by the Bureau of Indian Standards (BIS).
They will be given a certificate by the collection centre certifying the amount and purity of the deposited gold.
When the customer produces the certificate of gold deposited at the Purity Testing Centre, the bank will open a Gold Savings Account for the customer.
Under the scheme, both principal and interest to be paid to the depositors of gold, will be valued in gold.
For example if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms.
Customer will have the choice to take cash or gold on redemption, but the preference has to be stated at the time of deposit. The proposed scheme also seeks to benefit jewellers who can obtain loans in their metal account.
Banks and other dealers would also be able to benefit from the scheme. The scheme aims at reducing dependence on import of gold to meet the domestic demand and provide a fillip to the gems and jewellery sector in the country by making gold available as raw material on loan from the banks.
India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. The stock of gold in India that is neither traded nor monetised is estimated to be over 20,000 tonnes.