Gold Monetization Scheme Explained

After much waiting and anticipation, finance ministry has recently released a discussion paper, which is mainly proposed on the available gold monetization scheme. Moreover, finance minister has even promised to get acquainted with the available budget speech. Estimating the gold holding among so of the 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 in order to earn the interest balance in the metal account. Moreover, the jewelers are likely to obtain perfect loans in the available metal account.

#GoldMonetisationScheme: Tenure of gold deposits to be a minimum of 1 year; scheme to have tax exemptions. pic.twitter.com/nrFyFomGzy

— EconomicTimesMarkets (@ETMarkets) May 19, 2015

Objective of the gold monatization 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 liqiudity in market.
5. Make customers gold secure and a perporming Asset.

Here is how it works

 
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.

Track the Gold Price today in your City

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 form, be it in the jewelry segment or in the form of bullion. The hallmark centers in this area is going to deal with the testing centers, which are known for check out the purify 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.

#GoldMonetisationScheme: Banks to decide on #InterestRate on the gold monetisation; proposes minimum 30 gm of gold deposits under program

— EconomicTimesMarkets (@ETMarkets) May 19, 2015

Look for the melting

In this 45 minutes of testing, there is going to be a preliminary test and with x-ray fluorescence machine, to be used for the same purpose. In case, the customer disagrees to this testing mechanism, he has every right to take the ornament back. Moreover, for the second testing area, the fire assay can be hold responsible for complete 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 Gold Monetization Scheme
1. House hold or institution has to open gold saving account with bank.
2. Gold that costomer wants to deposit will be cleaned and checked for purity at Assaying centers.Assaying center will provide recipet to customer.
3. Assaying center informs bank of value to be credited to customer.
4. Gold is than sent to refineries for melting or storage.
5. banks tells refineries to send gold to jewellers.
6.Refineries send gold to jewellers on banks information.

How Deposited Gold will be utilized to benefits 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. that will increase money flow in 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:
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 jewelery industry.