Thursday Trivia – Understanding recent government gold schemes

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Thursday Trivia – Understanding recent government gold schemes


We Indians are believed to invest in 300 tons of gold every year. As a country this is working against us as most of the gold is imported. This is causing a scenario of current account deficit where our imports are more than exports. The government has now cleared two schemes primarily meant to reduce the import of gold. While the one tries to replace the need of buying it in physical form, by issuing gold bonds called as “Sovereign Gold Bond Scheme”, the second is the “Gold Monetization Scheme” or a new deposit tool meant to help people earn returns on the precious metal lying idle in bank lockers.


Let’s try and understand both the schemes one by one.

Features of Sovereign Gold Bond Scheme

  • The bonds are issued and backed by the government, equivalent to how many grams of gold you wanted to purchase. Denominations of 5, 10, 50 and 100 grams of gold.
  • You cannot buy more than 500 grams per person per year. (That’s about 12-13 lakh rupees at today’s prices).
  • The bonds will be issued for tenure of 5 to 7 years. Interest will paid on these bonds to the holder. Rate of interest will be decided time to time and will be announced shortly
  • At the end of the tenure, you will be able to visit a post office or bank and redeem the bonds, for the price of gold on the day you redeem.
  • You can use the bonds as collateral for loans and it will be tradable on a stock or bond exchange.
  • Purchase above Rs. 50,000 will be subjected to KYC norms and one would have to submit all the supporting proof.
  • Capital Gains will be like gold itself – 3 years and above is long term capital gains with indexation.
  • You only get rupees on redemption, not gold. But since it’s at the price of gold, you can go buy gold from the market.



Features of Gold Monetization Scheme

  • Gold Savings Account will be opened by customers at any time, with KYC norms, as applicable. This account would be denominated in grams of gold.
  • Centers spread across various parts of the country, those which will meet criteria as specified by Bureau of Indian Standards (BIS) will be allowed to act as Collection and Purity Testing Centers for the purpose of this scheme.
  • The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams.
  • The deposits under the scheme can be made for a short-term period of 1-3 years (with a roll out in multiples of one year); a medium-term period of 5-7 years and a long-term period, of 12-15 years (as decided from time to time).
  • Like a fixed deposit, breaking of lock-in period will be allowed in either of the options and there would be a penalty on premature redemption (including part withdrawal).
  • Interest Rate on short term deposits by will be decided by banks individually and will be denominated in grams of gold
  • For other tenures interest rate will be decided by government and will be denominated in rupees
  • For short-term deposits, the customer will have the option of redemption, either in cash or in gold, which will have to be exercised at the time of making the deposit.
  • For medium and long-term deposits, redemption will be only in cash

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