In a landmark move, the newly revamped Gold Monetisation Scheme (GMS) seeks to mobilise over 22,000 tonnes of unused gold lying with Indian families. In the revised scheme, the biggest change includes one that involves local jewellers. The minimum deposit amount has been reduced to 10g from 30g, according to the Ministry of Finance.
This new GMS will help the depositor earn interest at the rate of interest decided by Central Government and notified by Reserve Bank of India from time to time. India being the second biggest market of gold in the world, such strategies would help use gold to the country's economic advantage.
New GMS and its Salient features
Under the new Gold Monetization Scheme (2021), the government can now make it mandatory that at least one third of the public sector banks to provide GMS to customers on demand. Soon, the Government will ask the private sector banks also to offer GMS to its customers.
The government is planning to tweak the existing gold deposit and gold metal loan schemes to wean away investors from excessive investment in physical gold. The changes will make it eligible for a larger number of people to open gold deposit accounts as the minimum amount of deposit required in these gold accounts will be reduced substantially and other changes introduced to make these more attractive.
In the first stage, the issue of Medium term and Long term gold deposit certificates by banks will be transferred to a safe digital platform, which will soon be developed by State Bank of India, after which, a regulated securities depositary will be maintained by SBI to keep the certificates in a digital demat format.
Despite the government’s emphasis on gold monetisation over the last few years, including issuing gold bonds as part of its borrowing programmes, investment in physical gold and purchases of jewellery continues to outpace investment through financial channels.
A number of amendments have been finalised in existing revamped Gold Deposit Scheme, revamped Gold Metal Loan Scheme and India Gold Coin Scheme. These changes have been recently reviewed by the Finance Minister (Nirmala Sitharaman).
What it means for the Consumers
Under the revamped gold deposit scheme, investors can earn 2.25 per cent interest on medium- and long-term gold deposits having 5-7 years and 12-15 years tenure. Gold is accepted in the form of raw gold including gold bars, coins, jewellery excluding stones and other metals under the scheme.
Reducing the minimum amount to 10g will ensure that large number of people will be able to open gold deposit accounts.
What it means for Jewellers
Involving local jewellery retailers is a landmark move as for generations, customers have had a long standing relationship with jewellers. “It is definitely a welcome change. Involving jewellers at a local level is a big step. Jewellers are the ones who face customers on a daily basis. We have been in the field for nearly 70 years now and customers are very comfortable with us. We are very attuned to customer behaviour. They are able to share their concerns with us very easily and we will be in a position to help them deploy their gold easily. The key step has also been reducing the minimum amount from 30g to 10g. This will develop the relationship a jeweller will have with his clients as they are very apprehensive talking to the banks,” says Shreyansh Kapoor of Kashi Jewellers, Kanpur.
This move is also good in terms of increasing the amount of hallmarked jewellery in the market, as jewellers will be asked to set up BIS approved Collection and Purity Testing centers. “The gold we receive from customers would go to hallmarking centre to get checked for purity and quality. This should also reduce our dependence on imports. The more the GMS scheme gets enforced, the lesser we become dependent on imported gold. We will be using more of domestic gold, which we have in abundance,” adds Kapoor.
Revamped GMS Scheme in a Nutshell