Gold jewelry and coins are one of the most popular gold investment options in India. Apart from the investment angle, many buy gold jewelry just because of ornamentation purposes. In most cases, this jewelry stays idle at homes or bank lockers. But the Gold Monetisation Scheme (GMS) announced by the RBI will offer interest from the same gold. Under this scheme, one has to deposit the gold in any RBI designated bank; the bank gives interest on the same item.
Investors earlier had to face a large storage levy for their golds. Else, they had to keep their gold at home and get tensed about its safety. In the case of bank lockers too, the anxiety of safety stays. Although the Deposit Insurance and Credit Guarantee Corporation (DICGC) offers a cover upto Rs. 5 lakh for bank deposits, but there is no insurance for the items kept in the bank locker. However, the RBI's GMS does that for the investors and gives interest to them.
PNB is offering GMS
Punjab National Bank, one of the leading national banks in India is offering the scheme and said in a tweet, "Make your gold work for you! Deposit your unused jewelry and other Gold assets in Gold Monetisation Scheme and EARN." the scheme has Short Term Bank Deposit (STBD) of 1-3 years, Medium Term Government Deposit (MTGD) of 5-7 years, and Long Term Government Deposit (LTGD) of 12-15 years. The minimum deposit quantity is 10 grams but there is no maximum quantity. The deposit under Medium Term And Long Term is accepted by the bank on behalf of the union government.
Per Annum (PA) interest for 1 year is 0.50%, above 1 year up to 2 years is 0.60% and above 2 years up to 3 years is 0.75%. these were for Short Term Bank Deposit. For Medium Term Government Deposit the interest is 2.25% PA and for Long Term Government Deposit it is 2.50% PA. Interest is calculated on gold value in rupees, at the time of deposit.
For an STBD, premature withdrawal is permitted, but in case of premature withdrawal before completion of 1 year from the effective date of deposit, no interest will be paid. For an MTGD, it is allowed to withdraw any time after 3 years with a penalty on interest and for an LTGD, it is allowed to withdraw any time after 5 years with a penalty on interest.
What does the Gold Monetisation Scheme (GMS) aim?
The scheme aims to mobilize gold kept by the households and the institutions. This will facilitate its use for productive purposes and in the long run. It will also reduce India's dependency on the import of gold keeping in mind that India is one of the largest gold importers, globally. The demand for gold jewelry is very high in the country, but in most cases, they are kept idle. GMS is leading the gold market in India in a new direction.
GMS can be called a gold Fixed Deposit (FD) because the scheme replicates the procedure of a bank FD. At the time of maturity of the term of GMS, the investor will get the gold or the value of the gold back in addition to the interests earned.