The Cabinet approved Gold Bond and Gold Monetisation schemes to reduce the metal’s demand in physical form and alternatively channelizing it into the formal financial sector.
It is safer and economically more stable to go under both these schemes. India is estimated to have 20,000 tonnes of domestic stock of gold, which is mostly neither traded nor monetised. If the schemes help to mobilise at least a 10 per cent of the inert gold, it would help bring 2,000 tonnes of gold into the open market, to be utilised by the jewellery industry.
The Gold Bond scheme will have an annual cap of 500 grams per person and such bonds would be issued for a period of 5-7 years. Under this scheme instead of buying physical gold, Indian residents can buy the gold bonds. The Budget 2015-16 had proposed to launch a Sovereign Gold Bond (SGB) scheme to develop a financial asset as an alternative to gold.
The bonds will be issued in 2, 5 and 10 grams of gold or other order. As regards the Gold Monetisation Scheme, the minister said people holding inert gold can deposit it in banks for short, medium or long term. Bonds will be issued on behalf of the Government of India by the RBI, so that the bonds will have a sovereign guarantee.
This is not a black money immunity scheme and normal taxation laws would be applicable. Around 1,000 tonnes of gold is imported annually and people hold such quantum of inert gold just for investment purpose every year. By taking advantage of gold monetisation scheme, people can deposit idle gold with authorised agencies and take advantage of the price escalation of gold as well as earn interest on the deposit. The benefit to the government is in terms of reduction in the cost of borrowing, which will be transferred to the Gold Reserve Fund.
The monetisation schemes, which include the renovate Gold Deposit Scheme (GDS), would allow individuals to deposit a minimum of 30 grams of gold bullion into a gold deposit account and earn interest on it. The gold can be deposited for a short-term period of one to three years, a medium-term period of five to seven years and a long-term period, of 12-15 years.