THE GOLD-EN SCHEMES ARE HERE

THE GOLD-EN SCHEMES ARE HERE

Last week the cabinet finalized the 2 awaited schemes for the investors inclined towards the investment in the precious metal – THE GOLD. This will help the investors as they will get an alternative to invest in the metal indirectly.

The 2 schemes are –

      THE SOVEREIGN GOLD BOND SCHEME

      

      THE GOLD MONETISATION SCHEME

First let’s talk about the gold bond scheme in which the Reserve Bank of India will issue the bonds on behalf of the Government of India , and will be linked to the price of gold.

The bonds will be issued in denominations of 2,5 ,10 grams of gold and with a minimum tenor of 5 to 7 years. The best part is that these bonds can be traded and exchanged like negotiable instruments. People can also take loans against these papers.

T

he tax treatment of these bonds are still under examination, but if sources are to be considered then these will be treated as physical gold only, so that the investors are indifferent towards them.

Through this bond scheme the government is trying their level best to curb the physical need of the gold metal in our economy which is imported.

These bonds will have an upper limit of 500 grams per year per person. The interest will be valued in terms of gold but will be redeemable in rupees only.

On the whole this bond scheme looks like as huge success but the real questions lies that will it be able to deal with the highly priced imports for which it has been introduced. The answer lies in the future.

Secondly we have the infamous GOLD MONETISTAION SCHEME. Though the State Bank of India also has this kind of scheme with a minimum cap limit of 500 grams because of which this scheme could not take off as expected and could barely hold 8 tonnes so far.

But in the new scheme the minimum cap has been reduced to 30 grams. Under this scheme the gold will be melted and the certificate equivalent to the weight of the gold will be issued by the bank. The process of melting of the gold will be done by the authorized centers.

Both the principal and interest will be valued in terms of gold. The interest rate will be decided by the banks only. The investor will have the option to get the gold or the money equivalent to the gold at the end of the tenor.

According to the reports of the World Gold Council, more than half of the gold imported every year is converted to the gold ornaments.

The main motive of government behind this scheme is to get the yellow metal equivalent to 30000 tonnes out of the bank lockers and vaults of the high end individual and the temples.

But the real catch behind this is that will the Indians part way with the gold ornaments  given to them by their parents or which is associated with their marriage ; or the temples will give away the gold which they received as charity and donations and has a high religious value attached. And also the risk of tax scrutiny is there.

On the whole the Gold monetization scheme is really something to look forward to as its success rate doesn’t seem to be what government might be thinking.

WRITTEN AND POSTED BY

SAMIR DEWAN

EDITOR AT CHARTERED BLOOD