December 14, 2015
Gold Monetisation Scheme
This refers to the report “For Gold Scheme to Work Don’t Ask Source: Traders” (Economic Times, December 14, 2015). The report gives an impression that prospective depositors are being harassed by asking extra information when they approach banks for making deposits under Gold Monetisation Scheme. A perusal of the RBI Guidelines and the scheme details published by one of the banks implementing the scheme (SBI) does not give any clue to banks insisting on any additional information than those sought by banks while accepting deposits in cash. Brief details accessed are given below.

Gold Monetisation Scheme*
The Gold Monetisation Scheme, 2015 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.
Minimum Size
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 of 995 fineness. 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) and notified by the Central Government under the Scheme. The deposit certificates will be issued by banks in equivalence of 995 fineness of gold. The principal and interest of the deposit under the scheme will be denominated in gold.
Types of Deposits
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. While the former will be accepted by banks on their own account, the latter will be on behalf of 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.
Interest on Deposits
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.

 Reserve Requirements
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.
KYC to apply
The opening of gold deposit accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account.
Utilisation of Gold mobilised under GMS
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. 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.
Risk Management
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
Excerpt from SBI Gold Deposit Scheme**
Acceptance of gold
·        Gold i.e Gold bars, Coins, Jewellery etc. will be accepted in scrap form only.
·        Customers to submit Application Form, Identification Proof, Address Proof and Inventory Form.
·        Provisional Receipt issued at the time of acceptance of gold.
*Source: RBI Credit Information Review

**Source: SBI Website


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