In budget 2015, Finance Minister introduced the Gold Monetisation Scheme in India. India imports almost 800-1000 MT of Gold every and a rough estimate suggests about 20,000 MT gold lying in household. This gold neither gets sold not monetised in any way. We all can see ourselves as an example where old is lying safely in Bank lockers and no one even touch them for years.
Why Invest in Gold
Important reasons for high demand for gold in India as savings are:
• Gold could be Purchased in small quantities/amounts at different times
• Gold is metal so with unlimited shelf life. Jewellery are generally gifted on marriages and passed onto next generations.
• High value of Gold keep the quantity low and manageable in invertible amount.
• Gold is having a liquidity factor and a good value may be derived by selling it at anywhere any time.
What is Gold Monetization Scheme
It is a scheme that facilitates the depositors of gold to earn interest on their metal accounts. This means if you are having old in your savings and it is just lying in bank lockers then it is the time to deposit the same in your metal account. Once you deposit the same in your metal account, your will start earning interest on the same. The rate of interest is yet to be determined but one can expect something like 0.75% to 2.5%. jewellers also will be able to obtain loans on their metal account.
How it generally works
When a customer bring in his or her gold to the counter of specified agency or bank, the purity of gold is determined. The determined or verified purity defines the exact quantity to be credited in the metal account. While depositing the gold, customer may be asked to complete KYC process which seek ID and Address proof along with PAN details.Generally period of deposit is expected to be 1 to 7 years. This deposited gold will be lent by Banks to jewellers at a interest rate little higher than what is paid to you.
1. The gold kept in the lockers may earn you an additional income to the tune of 1 to 3% per annum. This over and above the price appreciation of gold. You may compare it with something like dividend on share which come over and above the price appreciation.
2. The interest income that you earn is not by selling your gold and the total quantity still exists in your ownership however in your metal account.
3. The regular income coming from the family gold may be invested in recurring deposit or pension scheme to create a security for your self and your family members.
1. You will have the gold in your metal account but not in the same form like jewellery. It will be melted and the metal account will be credited for the quantity. So when you earn interest on gold you will not be able to use it.
2. Their may be some costs associated in melting gold and recasting the same as jewellery once you withdraw from your metal account.
3. The centres and banks for depositing gold in this scheme may be not adequate and a person may have to travel distance for opting the scheme.
Though the exact process is yet to be informed but the face, it looks to be a very attractive scheme. So, now you may purchase gold directly and deposit it in your metal account and gain not only from price appreciation but also from additional interest component. The only people which may think themselves to be left out are the one who wish to preserve the parental jewellery as a symbol of affection.
Indian Gold Coin
Apart from this, FM also announced the launch of Gold coin with Askok Chakra on the face of it. This Indian Gold coin will be prepared by recycled gold.