The Gold Monetisation Scheme was introduced in 2015 but why hasn’t it picked up
Gold Monetisation Scheme
According to an article in TOI by Bhargav Selarka, Senior Tax Professional, EY India, over the last few decades, household stock of gold has piled up significantly. To put this asset to productive use and help reduce Indiaâs dependence on gold imports, the government introduced the Gold Monetisation Scheme (GMS) in 2015.
One can deposit gold in any form (bars, coins, jewellery excluding stones and other metals) in a GMS account with banks to earn interest and also not lose out on the appreciation in gold value. The income under GMS also enjoys exemption from income-tax in India.
How does it work?
Any Indian resident can approach the Collection and Purity Testing Centre (CPTC) with the gold. The CPTC tests the purity of the gold and provides advice. On the basis of this advice, the bank deposits the amount specified in the advice in the GMS account and issues a deposit certificate. The GMS accounts are subject to KYC norms. In some cases, the banks can directly collect the gold and provide deposit certificates.
Why has GMS not picked up?
Indians consider gold as a safe investment option as gold has long been an effective hedge against inflation. However GMS, with all its benefits and attractive features, has not quite picked up pace owing to factors such as lack of awareness about GMS, low interest rates and the classic Indian desire for holding physical gold.
Making it popular
Tweaks to the GMS, which may be undertaken as policy changes in a gradual manner, would help make it popular. Increasing the interest rates to 4%-5% is likely to generate greater financial interest and may compensate for any loss arising on account of making-charges and process-loss on the gold, if it is sold in times of hardship, such as Covid. Also enabling a regulated market for trading the GMS certificates could enhance liquidity thereby promoting the GMS.