Have you ever wondered if you could get an additional interest on your physical gold? I am talking about real gold here, which can be jewellery, gold coins, gold bars etc, which can fetch you an additional interest despite the capital appreciation with time. Yes it is possible. Read this article to find out.
What is Gold Monetization Scheme (GMS)
Gold Monetization Scheme, which is also called GMS is a scheme launched by the Government of India to deploy the gold in physical form to facilitate its use for productive purpose and to reduce the gold imports in the country. It is estimated that India is the second largest consumer of gold after China.
How did this scheme come into practice
Government of India launched this scheme in 2015 to use the idle gold kept by people, organizations and temples. Gold constituted as a large part of investment for many Indian households.
The government launched the scheme as a way to reduce the Gold imports into the country. This can help the government to protect the foreign currency going out.
What are the benefits of Gold Monetization Scheme
The most prominent benefit of the Gold Monetization Scheme is that you can earn interest on your physical gold, be it jewellery, gold coins and gold bars. This is an additional interest on your idle lying gold despite the capital appreciation with time.
When you own physical gold, you are always in fear to store this gold units at your place of residence. You prefer to keep it in the a bank locker. Thus participating in the Gold monetization scheme, you will save your money on locker charges.
One more benefit of this scheme is that the interest earned from the GMS are exempt from income or wealth tax.
What I can suggest you is to put all the broken idle jewellery into the Gold Monetization Scheme. These can be all the old gold pieces which are of no use to your family members. This will be a great way to monetize your gold.
Some limitations you should be aware of
Gold with stones embedded are not acceptable for the Gold Monetization Scheme. You may dismantle the precious stones from your jewellery before applying for GMS.
Gold has to have the desired purity to be accepted for the Gold Monetization Scheme. Bureau of Indian Standards have set a benchmark for the gold to be accepted, which is 995 purity.
The annual returns are up to 2.5% PA for long term, like more than 15 years. The returns can even go lower for shorter duration. Personally, I find the rate of return to be fairly lower as compared to other investment options available.
Another important thing you need to be aware of is that you will not get the same units of gold back after the maturity period. Therefore make sure that you avoid giving jewellery which have an emotional attachment to it.
How can you apply for Gold Monetization Scheme
The application process for the Gold Monetization Scheme is very simple. All you need to do is walk in to any nationalized bank with your gold. Fill the GMS application form in the bank.
The bank will give you a ticket which is also called a counterfoil, which you then have to take it to a Refiner’s Purity Verification and Testing Center (PVC) for testing your gold.
The bank will provide you the location of the testing center. You then have to produce the counterfoil at the testing center who will then verify you.
You will get a certificate once the the purity of gold will be tested. The gold quantity with purity 995 will be extracted from your gold and a certificate will be given to you along with the quantity of gold (in gram) to be pledged.
You then have to produce this certificate to your bank within 30 days of testing.
The bank will then open a Gold Deposit Account in your name and all your digital gold units will be stored there.
Some FAQs on the Gold Monetization Scheme
As per the guidelines, it is possible to withdraw your gold before maturity, but some amount of penalty will be levied to the investor. However there is a minimum lock in period of 3 years for medium term investment and 5 years for long term investment.
The aim of this scheme is to reduce the imports of gold into the country by utilizing the gold available with the Indian households. A reduction in gold imports will result in less draining out of foreign currency.
No. Jewellery with stones embedded in them are not eligible for GMS. Also the quality of the gold has to meet the BIS standards.
The minimum quantity is 30 grams.
If you have any more queries about the GMS scheme, feel free to drop them in the comments. I will answer your doubts in this FAQ section for the benefit of everyone.
I hope you have got some insights on the Gold Monetization Scheme and how you can take benefits out of it. If you liked this then share this article to spread more awareness on this topic.
Also check out Department of Economic Affairs for more insights on this article and also the list of banks that accept GMS.