Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

Gold Monetization Scheme Explained

2 min read

After much waiting and anticipation, the finance ministry has recently released a discussion paper, which is mainly proposed on the available gold monetization scheme. Moreover, the finance minister has even promised to get acquainted with the available budget speech. Estimating the gold holding among so of Indian households is now getting at none other than 20,000 tons+, and the finance minister is likely to introduce a perfect gold monetization scheme.  This scheme is likely to replace both the gold metal and gold deposit loan scheme. With the help of this new scheme is likely to allow the depositors to work to earn the interest balance in the metal account. Moreover, the jewelers are likely to obtain perfect loans in the available metal account.

The objective of the gold monetization scheme is to:

  1. Mobilize the gold held by households and institutions in the country.
  2. Make it available to banks and Jewelers.
  3. Reduce gold imports.
  4. Improve liquidity in the market.
  5. Make customer’s gold secure and a performing Asset.

Here is how it works
Gold Monetization Scheme
 
More about the scheme

With the help of this scheme, banks and other financial dealers would now be able to monetize the gold structure, without any problem. The main aim of the discussion paper is to avail public comments on some of the proposed schemes. The comments are likely to be posted on the available government side, and there are many comments, already available in this segment. Now, the minimum set amount of the gold is proposed to be at around 30 grams, which will encourage even the small depositors.

Look for the guidance

However, in the extant schemes, the minimum amount of gold is likely to be towards 500grams. Gold can be placed in any of the forms, be it in the jewelry segment or in the form of bullion. The hallmark centers in this area are going to deal with the testing centers, which are known for checking out the purifying level of the gold. On the other hand, the testing center is likely to tell the customers, regarding the approximate amount of gold, purchased by the customer. In case, the customer agrees, that person is likely to do KYC and provide consent for melting the gold amount. The time, used for the testing is nearly 45 minutes.

Look for the melting

In this 45 minutes of testing, there is going to be a preliminary test with an x-ray fluorescence machine, to be used for the same purpose. In case, the customer disagrees with this testing mechanism, he has every right to take the ornament back. Moreover, for the second testing area, the fire assay can be held responsible for the destruction of the said ornament. This method is going to take place only when the customer agrees to the preliminary test results.

For the second test

In this stage, before starting the melting procedure, the ornament is cleaned thoroughly, to remove studs, dirt and even melted, under the same segment. This can help you to understand the net value of gold. Then, the gold ornaments are likely to be melted just in front of the customers, which can be used to ascertain the metal’s purity rate. This procedure might take place for three to four hours. However, in case, you are planning to open a gold saving account, make sure to produce the certificate.

Various Stages in the Gold Monetization Scheme

  1. Individuals or institutions are required to open a gold savings account with a bank.
  2. The gold intended for deposit will undergo cleaning and purity assessment at Assaying Centers. Following this, the customer will receive a receipt from the center.
  3. The Assaying Center will then notify the bank of the gold’s value, for crediting to the customer’s account.
  4. Subsequently, the gold is dispatched to refineries for either melting or secure storage.
  5. The bank instructs the refineries to distribute the gold to jewelers.
  6. Based on the bank’s directives, the refineries then dispatch the gold to the respective jewelers.

How Deposited Gold will be utilized to benefit the economy?

CRR/SLR:
It is proposed that Banks may be permitted to deposit the mobilized gold as part of their CRR/SLR requirements with RBI which will increase money flow in the market.

Foreign Currency:
Banks may sell the gold to generate foreign currency. The foreign currency thus generated can then be used for onward lending to exporters/importers.

Coins:
Bank may convert mobilized gold into coins for onward sale to their customers

Exchanges:
Banks may buy and sell on domestic commodity exchanges, where mobilized gold can be delivered.

Lending to jewelers:
The bank may Lend the Gold to the Jewelers, domestic availability of gold will increase. India’s import bill will come down. that will reduce CAD. It will also boost the jewelry industry.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

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One Reply to “Gold Monetization Scheme Explained”

  1. Hi,

    This looks like scam too me. The Govt hold less than 600 Ton GOLD, if tomorrow we have monetary crisis (which is coming from western govt debt trap ) and people runs to bank to get their gold deposit back how the hell they going to give customer their gold back ? If even there is run for 1000 ton gold the govt does not have that much gold to redeem people gold certificate.

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