Introduction of Gold Monetization Schemes

EXECUTIVE SUMMARY
The study of Gold Schemes should help you answer three questions. Where you are today, that
is, your current personal balance sheet, where do you want to be tomorrow, that is,
finances linked to your goals, and what you must do to get there, that is, the asset allocation and
investment strategy that will help you achieve your objectives.
Managing an investment portfolio in todays dynamic market scenario is a challenge for every
individual, who works hard to achieve the ultimate goal for preserving and generating wealth for
their future. Financial markets are complex and diverse enough that one can try and grow his
wealth in multiple ways. The greatest challenge in making an investment is knowing exactly
where to invest and when to invest in order to maximize the returns in long run.
One of the best and safest ways to invest is investing in fixed income investments. These are
normally in the form of stock & bonds issued by corporations or governments or from dividends
paid to shareholders by a corporation. Issues effecting fixed income are the credit worthiness or
default risk of the issuer and the yield earned by the holder.
In order to achieve long term goals an individual requires patience, discipline and a deep
knowledge of macroeconomic trends. In an environment when an economy is growing, most
investments will tend to grow / rise in value, which will in turn help making capital gains
relatively easy to come.
Asset allocation is much more difficult and crucial in a period when market is stagnant or there is
a contracting growth. During these times, the individuals need to monitor capital flows to know
which assets can maintain and grow their value over a period of time.
In order to grow the investments on a long term basis the investments should be diversified as it
will reduce the risk while preserving growth potential. Investments, through a source of gain to
generate wealth from the existing wealth, includes various risks alongwith it.
In order to preserve and generate wealth for future, an individual needs to learn about the
investment alternatives. A broad investment planning is required and can be implemented by an
investors even in the early 20s. It will help the investor to manage his funds wisely and meeting
his / her future goals in a satisfactory manner.
BACKGROUND OF THE STUDY

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The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, gave its approval for
introduction of Gold MONETISATION Schemes (GMS), as announced in the Union Budget
2015-16.
The objective of introducing the modifications in the schemes is to make the existing schemes
more effective and to broaden the ambit of the existing schemes from merely mobilizing gold
held by households and institutions in the country to putting this gold into productive use. The
long-term objective which is sought through this arrangement is to reduce the countrys reliance
on the import of gold to meet domestic demand.
GMS would benefit the Indian gems and jewellery sector which is a major contributor to Indias
exports. In fiscal year 2014-15, gems and jewellery constituted 12 per cent of Indias total
exports and the value of gold items alone was more than $13 billion
The mobilized gold will also supplement RBIs gold reserves and will help in reducing the
governments borrowing cost.
The revamped Gold Deposit Scheme (GDS) and the Gold Metal Loan (GML) Scheme involves
changes in the scheme guidelines only. The risk of gold price changes will be borne by the Gold
Reserve Fund that is being created. The benefit to the Government is in terms of reduction in the
cost of borrowing, which will be transferred to the Gold Reserve Fund.
The scheme will help in mobilizing the large amount of gold lying as an idle asset with
households, trusts and various institutions in India and will provide a fillip to the gems and
jewellery sector. Over the course of time this is also expected to reduce the countrys dependence
on the import of gold. The new scheme consists of the revamped GDS and a revamped GML
Scheme.
Revamped Gold Deposit Scheme

Collection, Purity Verification and Deposit of Gold under the revamped GDS:3
Out of the 331 Assaying and Hallmarking Centres 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 1 Centres for purity of gold for the purpose of this
scheme. The minimum quantity of gold that a customer can bring is proposed to be set at 30
grains. Gold can be in any form (bullion or jewellery). The number of these centres is expected
to increase with time.
Gold Savings Account:In the revamped scheme, a 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.
Transfer of Gold to Refiners:Collection and purity testing centres will send the gold to the refiners. The refiners will keep the
gold in their ware-houses, unless banks prefer to hold it themselves. For the services provided by
the refiners, they will be paid a fee by the banks, as decided by them, mutually. The customer
will not be charged.
The banks will enter into a tripartite Legal Agreement with refiners and Collection and Purity
Testing Centres that are selected by them to be their partners in the scheme.
Tenure:The deposits under the revamped 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:-
The amount of interest rate payable for deposits made for the short-term period would be decided
by banks on basis of prevailing international lease rates, other costs, market conditions etc. and
will be denominated in grams of gold. For the medium and long-term deposits, the rate of
interest (and fees to be paid to the bank for their services) will be decided by the government, in
consultation with the RBI from time to time. The interest rate for the medium and long-term
deposits will be denominated and payable in rupees, based on the value of gold deposited.
Redemption:For short-term deposits, the customer will have the option of redemption, for the principal
deposit and interest earned, either in cash (in equivalent rupees of the weight of deposited gold at
the prices prevailing at the time of redemption) or in gold (of the same weight of gold as
deposited), which will have to be exercised at the time of making the deposit. In case the
customer will like to change the option, it will be allowed at the banks discretion. Redemption
of fractional quantity (for which a standard gold bar/coin is not available) would be paid in cash.
For medium and long-term deposits, redemption will be only in cash, in equivalent rupees of the
weight of the deposited gold at the prices prevailing at the time of redemption. The interest
earned will however be based on the value of gold at the deposit on the interest rate as decided.
Why Is India Promoting Gold Monetization?

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India is the second-largest buyer of gold across the globe. Thus, the changes in demand patterns
from the country may likely have an impact on the prices of gold. Gold futures on COMEX, a
commodity division of the New York Mercantile Exchange, has lost 1.9% on a YTD (year-todate) basis. Silver futures have marginally gained 0.64%. Whereas, platinum and palladium fell
by 17.5% and 13.4%, respectively. The Reserve Bank of India has announced the standards for a
gold monetization scheme. Such a system may curb the import demands from the country. The
approximated figure stands at ~900 tons annually, according to information posted on the Gem &
Jewellery Export Promotion Councils website.
Indias retail gold investors show gold hoarding behavior, where tons of gold are at peoples
disposal, either in their homes or bank safe lockers. The estimated figure held by individuals or
trusts is close to 20,000 tons. The move will also likely cut the current account deficits for India,
as gold imports constitute a significant chunk. Gold enthusiasts under this scheme can earn
interest on the amount deposited with the government. Rather than putting up gold in safe
deposits, investors can opt for an interest-bearing gold. Such a provision can likely convert gold
from a non-interest bearing asset to an asset comparable to other assets like bonds and equities.
The principal and interest of the deposit under the scheme will be denominated in gold.
The scheme may affect the physical demand for gold. Further, the overall gold demand may also
influence the price of gold-backed ETFs like the SPDR Gold Shares Trust (GLD) and the iShares
Gold Trust (IAU). The three stocks AngloGold Ashanti (AU), Agnico Eagle Mines (AEM), and
Barrick Gold (ABX) make up 16.1% of the Market Vectors Gold Miners ETF (GDX)
BACK GROUND OF TOPIC

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How Do Fluctuations In The Gold Rate Affect The Indian Economy?

Indians are hungry for gold. Whether its for investments, gifts, as tribute to deities, weddings or
any festive occasion, gold is an important part of the equation.
Gold is considered to be a symbol of prosperity, good fortune and has an inherent value in terms
of purity and wealth. According to reports, Indians in India hold more gold than any other
population in any other country. While the reasons for this are many, the fact remains that
Indians buy and hold gold as a cultural norm.
This insatiable hunger for gold has resulted in Indias gold imports constituting a massive
12.50% of its total imports in 2012-13, which is a whopping $61,409 million dollars. In 2012,
the total gold production in the world stood at 4,130 tonnes, and India imported 26.12% of that
(1,079 tonnes) one fourth of the worlds total gold production.
A countrys exports must be more than its imports to maintain a favourable balance and grow the
per-capita income of the country. As of December 2012, we have a current account deficit of
6.7% (experts, analysts and the RBI says that we can sustain only with a maximum consistent
deficit of up to 2.5%). To counter this, the RBI has implemented an 80:20 system, wherein 80%
of the imports would be used to satisfy domestic demand and 20% would have to be re-exported
after value additions, by turning gold bricks into jewellery.
In 2011-12, around 56% of all the gold that was being imported came through banks who sold it
to the public in the form of coins. In 2013, the Finance Ministry banned banks from selling gold
coins in an effort to control the expanding current account deficit (CAD).
Gold also affects the Indian economy because it is a non-productive asset. As a commodity, gold
does not add any real value to the productive capacity of the economy. Most of the gold thats
purchased in India is stashed away in lockers and safe boxes, or gets converted into jewellery.
Those who hold gold are just waiting for it to appreciate so that they can see some income and
returns on investment, or just hold it even after it appreciates to increase their personal wealth.
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Gold is used in India as a form of tackling inflation, and holding an item with an intrinsic value
because of its rarity is a good way to counter the fluctuations in fiat currency. As a traditional
form of savings in India, gold instils a feeling of comfort and security in a persons wealth. This
has been termed the exposure effect by psychologists.
While holding financial gold and gold in the form of ETFs and E-gold is a prudent investment,
holding physical gold in the form of a real asset is preferred for the simple reason that it can be
held, felt and kept safe in a box. This experience of physically owning gold is important to
Indians, and is another reason why we like gold so much its safer in terms of real value than
the Rupee, and appreciates over time.
The government is also raising its import duty to combat the rising import rates of gold. Between
January 2012 and 2013, the import duty has been raised 5 times from 1% to 10%. This move has
been mimicked by Sri Lanka as well, in an attempt to curb gold smuggling.
Among Indias three primary imports crude oil, cooking oil and gold, only the first two are
vital necessities. There are small things the government can do to decrease the damage dealt by
the massive amounts of gold being imported. One of these is to reduce the amount of nonessential imports (how much we import is mentioned in brackets) like spectacles (Rs.336 crore),
dolls (Rs.431 crore), cosmetics (Rs2,713 crore), etc. Educating the unemployed masses in the
production of these items can massively reduce the dependency on importing them, tilting the
international trade scales in our favour while consequently creating employment and may even
help boost exports.
People buying gold do so without keeping in mind the macro-economic ramifications and
damage caused to the countrys economy, but obviously cannot stop buying gold due to the lack
of an alternative investment medium that has the same benefits as gold. There is also an inborn
sense of trust in the value of gold, in that it will always hold some value even if all other forms of
wealth like fiat currency and bank balances are somehow devaluated or inflated, for whatever
reason.
Acts as simple as purchasing gold as an investment affects the condition of the economy, as at
least one million other Indians are purchasing gold on the same day for the same reason,
somewhere else in India. Consider investing in other mediums and vehicles that will offer you
excellent returns on your investment, you might just be saving the economy.
How does gold investment affect the Indian economy?

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So here I'm assuming we are referring to "investment" made by the consumer and not the part of
government spending.
Based on this, following are the ripple effects:
1) An increase in Current Account Deficit: As we know, gold bullion and raw form is
used for minting currency. The more a country purchases gold, the more the reserves dry up
leaving the metal scarce in government's treasury. This needs to be noted from the fact that any
slump/hike in sensex is accompanied sooner or later by change in price of gold.
2) Hike in international prices: During the UPA rule, 80:20 rule was launched under
which for every amount of gold imported 20% had to be exported. The point being the more the
demand, the more would be the hike in price following the simple demand price rule. Given that
we Indians have a fetish for gold, gold lies idle stacked up at house feeling happy that the gold
prices are skyrocketting. This is , in a way, hoarding of resource.
3) Drain foreign reserve: This is interlinked with the CAD mentioned in point 1. Much like
crude oil, rightly called black gold, a country has to dish out money in USD to procure the
commodity.
The recent sovereign bond scheme launched by Government of India addresses these problems
by making consumer earn interest on bonds.
Indian investors had been keen on investing in gold since the last economic downturn. The basic
reason being that they were loosing confidence in the other asset classes. The demand for gold
shot up as the market speculation worked in favor of gold and not because of demand due to its
intrinsic value. Investors also found gold as a hedging option against the then weakening
currency.
From the country's economic standpoint this was bad. It triggered the CAD(Current Account
Deficit) to go up as the gold had to be imported to meet the demand. This did have cascading
impact on inflation as the import further weakened the currency and this resulted in paying
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higher prices for oil imports. Higher oil prices directly got translated to price hike(inflation).
Government needed to bear the hike in oil prices by subsidizing and that made the FD(Fiscal
Deficit) to shoot up, which had negative impact on country's economy. Eventually, mounting of
fiscal deficit and inflation stagnated the growth, same time giving no room for the central bank to
ease the interest rates due to inflation. The long term implications were experienced in the form
of stagflation(gold import is not the only reason).
Gold price has been dropping down since the formation of new govt as the investors are gaining
back confidence in the revival of the economy and they are finding new avenues of investments
other than gold. This is definitely a positive move that could strengthen the economy.
While gold investment does affect Current Account Deficit, it's a myth that ETF gold investment
will not have the same effect.
ETFs are mandated by law (SEBI) to buy gold or equivalent contracts for the money invested
with them (minus the operations cost). The source can be domestic or international market
depending where the supply lies. They don't keep buying indefinitely - they just buy small
amounts at higher price pushing up the price of gold. In this era of open markets, obviously it
makes no sense to buy at higher price domestically what is available at cheaper price
internationally. In fact, BSE is more fair in gold price than your neighborhood jeweler!! The fact
that gold supply is limited is the reason it has been used as a currency base for millenia. In that
sense, gold investment whether in physical or paper form has the same effect on CAD.
Gold is a hedge against inflation. Importing gold is not as bad as importing a TV or a cell phone.
Gold acts as a sponge for disposable income which would otherwise be spent on non productive
consumption anyway.
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One can't assume that a long term decline in gold purchase habit of Indians would necessarily
lead to a stronger rupee. The room created by fall in gold purchases, could be replaced by higher
imports.
Besides, a weaker rupee, boosts domestic production and improves exports.
Look at China, it has artificially undervalued its currency. Result is, it has become manufacturing
hub of the world. Manufacturing requires economies of scale. Their scale is so large that now
they have a genuine competitive advantage so even if they stop undervaluing their currency, their
industries can still be very competitive.
More importantly, the world is going through tectonic shifts. US dollar may lose its status as the
reserve currency. Dollar was once backed by Gold. In fact dollar was like a gold certificate. You
could exchange certain amount of dollars for certain amount of gold. Basically a dollar was as
good as gold. That is what made it acceptable as a reserve currency.
This stopped being true in 1971. Dollar is no longer pegged to gold. The world should have
stopped using dollars right then. But changing the status quo at this scale is never easy, so the
world stuck with it.
Since the dollar is not backed by gold now, US can print as many dollars as it likes and buy
goods, services from rest of the world. It can grant huge loans to countries, it can pour
investment dollars and buy up revenue generating assets all over the world. When countries
accept such money they are essentially selling their goods, services, stake in local companies in
exchange of something created out of thin air.
This exorbitant privilege to a single country is unfair and resented by the entire world. The status
quo is bound to change and is only a matter time. And when it does, we are going to go through a
very rough period. In such times Gold would serve as an excellent hedge.
Utilization:The deposited gold will be utilized in the following ways:12
(1). Under medium and long-term deposit:

(i). Auctioning.
(ii). Replenishment of RBIs Gold Reserves.
(iii). Coins.
(iv). Lending to jewellers.
(2). Under short-term deposit:

(i). Coins.
(ii). Lending to jewellers.
(3). Tax Exemption:

Tax exemptions, same as those available under GDS would be made available to customers, in
the revamped GDS, as applicable.
(4). Gold Reserve Fund:

The difference between the current borrowing cost for the Government and the interest rate paid
by the Government under the medium/long term deposit will be credited to the Gold Reserve
Fund.
(5). Revamped Gold Metal Loan Scheme.

(6). Gold Metal Loan Account:
A Gold Metal Loan Account, denominated in grams of gold, will be opened by the bank for
jewellers. The gold mobilized through the revamped GDS, under the short-term option, will be
provided to jewellers on loan, on the basis of the terms and conditions set-out by banks, under
the guidance of RBI.
(7). Delivery of gold to jewellers:

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When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from
refiners. The banks will, in turn, make the requisite entry in the jewellers Gold Loan Account.
Interest received by banks: The interest rate charged on the GML will be decided by banks, with
guidance from the RBI.
(8). Tenor:
The tenor of the GML at present is 180 days. Given that the minimum lock-in period for gold
deposits will be one year, based on experience gained, this tenor of GML may be re-examined in
future and appropriate modifications made, if required.
PM Narendra Modi launches 3 gold schemes
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In a move to reduce the demand for physical gold, Prime Minister Narendra Modion Thursday
launched three gold related schemes, including India gold coin bearing Ashok Chakra, gold
monetisation and sovereign gold bond schemes to tap the festive season ahead of Dhanteras and
Diwali.
The gold monetisation schemes (GMS) aims to tap household gold stocks of around 22,000
tonnes, the sovereign bond scheme would help shift part of the estimated 300 tonnes of physical
gold bars and coins purchased every year in the country for investment into the demat gold
bonds.
We take a look at all three schemes:

Gold coins
-The coins will be available in denominations of 5 and 10 grams. A 20 gram bar or bullion will
also be available. About 15,000 coins of 5 gm, 20,000 coins of 10 gm and 3,750 gold bullions
will be made available through MMTC outlets.
-The Indian Gold coin is unique in many aspects and will carry advanced anti-counterfeit
features and tamper proof packaging that will aid easy recycling.
-These coins will be distributed through designated and recognised MMTC outlets.
Gold Monetisation Scheme

Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds
registered under Sebi norms) can make deposits under the scheme. The minimum deposit at any
one time will be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to
30 grams of the precious metal of 995 fineness. There is no maximum limit for deposit under the
scheme and the metal will be accepted at the Collection and Purity Testing Centres (CPTC)
certified by the Bureau of Indian Standards.
Few things to know about the scheme

Gold Monetisation Scheme can earn up to 2.50 per cent interest rate on their idle gold.
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Interest rate on Medium and Long Term Government Deposit (MLTGD) are 2.25 per cent and
2.20 per cent, respectively.
The tenor of medium term would be between 5-7 years while long term would for 12-15 years
tenure.
The deposit under MLTGD category will be accepted by the designated banks on behalf of the
central government.
-Interest on deposits under the scheme will start accruing from the date of conversion of gold
deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the
Collection and Purity Testing Centres (CPTC) or the banks designated branch, as the case may
be and whichever is earlier.
The principal and interest of the deposit under the scheme will be denominated in gold.
The gold received under MLTGD will be auctioned by the agencies notified by the government
and the sale proceeds will be credited to governments account held with RBI.
Reserve Bank of India will maintain the Gold Deposit Accounts denominated in gold in the
name of the designated banks that will in turn hold sub-accounts of individual depositors.
Top 6 Common Uses For Gold

Gold has been revered in almost all human cultures for as long as civilizations have been able to admire
and use this precious metals unique properties. Gold is extremely malleable, conducts electricity,
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doesnt tarnish, alloys well with other metals and is easy to work into wires or sheets. Not to mention,
gold is unrivaled in its natural brilliant luster and glossy shine. Because of these unique properties, gold
makes its ways into almost every sphere of modern life in some way, shape or form.
Here are the 6 most common uses for gold in the world today:
Jewelry:
About 78% of gold consumed each year is made into jewelry. Jewelry is the most common way gold
reaches consumers, and has been a primary use for the metal in various cultures. Because of its beautiful
and durable properties, gold jewelry is an adornment that is both ethereal and revered. Especially in India,
adorning the body with gold is a way to attract wealth and blessings.
Finances and Investing:

Because gold is so rare and highly valued, this precious metal makes a natural currency, and has for at
least 6,000 years. The U.S. used to hold all its monetary currency to a gold standard, and since the turn of
the millennium, gold value has been on the rise in the stock market. In an uncertain economy, gold has
emerged as a possible financial staple. One of the most common ways to hold or invest in gold is in gold
coins, gold bars, also gold bullion. A gold IRA is a increasingly popular way to invest in gold as well.
Electronics and Computers:

Gold is a highly efficient conductor that is able to carry tiny electrical charges, and because of this
property a small amount is found in almost all electronic devices, including cell phones, televisions, GPS
units and more. Because gold is such an efficient conductor of electrical charges, it is also often found in
desktop and laptop computers to transfer information quickly.
Dentistry and Medicine:

Gold makes for the best fillings, crowns, bridges and orthodontic appliances because the metal is
chemically inert, easy to insert and nonallergenic. Gold has been used in dentistry since 700 B.C. and will
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probably continue to be the best option for replacing broken or missing teeth. In the medical field, small
amounts of gold isotopes are used in certain radiation treatments and diagnosis.
Aerospace:
In the aerospace industry where reliable and effective technologies are key to survival, gold plays an
essential role. Gold is used to lubricate mechanical parts, conduct electricity and coat the insides of space
vehicles to protect people inside from infrared radiation and heat.
Medals and Awards:

As a highly esteemed precious metal, gold makes a natural appearance in crowns, awards and religious
statues. Because of its unparalleled beautiful qualities and rarity, gold is one of the highest status symbols.
In everything from Academy Awards to Olympic medals, gold is recognized for its admirable qualities
and it holds a permanent place of value in humanitys eyes.
Sovereign
Gold
Bond
Instead of buying gold in physical form investors can park their money in bonds which are
backed by gold. The bonds will be available both in demat and paper form. Sovereign Gold Bond
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has more or equal advantage against the physical gold. The bond will be issued by RBI on behalf
of the Government of India. The bond would be restricted for sale to resident Indian entities and
the maximum allowable limit is 500 grams per person per year.
Few things to know about the scheme

The RBI has fixed the public issue price of sovereign gold bonds at Rs 2,684 per gram.
These bonds will be issued in denominations of 5, 10, 50 and 100 grams of gold or other
denominations.
Applications for the bond will be accepted from November 5-20. The Bonds will be issued on
November 26.
The Bonds will be sold through banks and designated post offices as may be notified.
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The borrowing through issuance of Bond will form part of market borrowing programme of
Government.
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to
ordinary gold loan mandated by the Reserve Bank from time to time.
Know-your-customer (KYC) norms will be the same as that for purchase of physical gold.
KYC documents such as Voter ID, Aadhaar Card/PAN or TAN /Passport will be required.
-The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of
1961) and the capital gains tax shall also remain same as in the case of physical gold. Bonds will
be tradable on exchanges/NDS-OM from a date to be notified by RBI.
The Bonds will be eligible for Statutory Liquidity Ratio(SLR). Commission for distribution
shall be paid at the rate of 1% of the subscription amount.
10 Point Guide to Gold Schemes Launched by PM Narendra Modi

1. Under the scheme, banks will collect gold for up to 15 years to auction them off or lend
to jewellers from time to time. They will pay 2.25-2.50 per cent interest a year, higher
than previous rates of around 1 per cent.
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2. The country has amassed about 20,000 tonnes of gold worth over $800 billion (Rs.52.40
lakh crore) in family lockers and temples and previous attempts at mobilising this gold
have been unsuccessful.
3. "20,000 tonnes of gold is just lying unused. That is the reason we are poor," PM Modi
said today and added, "If we make some effort in the right direction, we can be free of
this tag."
4. People can deposit a minimum 30 grams of raw gold - bars, coins, jewellery excluding
stones and other metals. There is no maximum limit for deposits under the scheme.
5. A Gold Sovereign Bond Scheme also launched today offers 2.75 per cent interest to
domestic investors to cut physical buying. Interest on gold bonds, which can be used as
collateral for loans, will be payable every six months.
6. PM also unveiled a gold coin with the Ashok Chakra engraved on one side. These gold
coins weigh five or 10 grams. A 20-gram gold bar will also be available for purchase.
7. Industry experts and bankers say many prospective depositors may not take up the
MONETISATION scheme due to concerns that the tax department could question the
source of gold.
8. Investors will have to disclose their permanent account number, registered with the
income tax department, if the value of gold is worth more than Rs. 50,000. Some people
fear it is a way for the government to keep a tab on the source.
9. Another concern is the likely loss of 20-30 per cent of the weight of jewellery as it is
melted at certified centres at the cost of the depositor. Also, say experts, some people may
find conventional bank deposit rates of 8 per cent more attractive.
10. Huge gold imports pushed India's current account deficit to a record $190 billion
(Rs. 12.48 lakh crore) in 2013, prompting the government to hike its duty on imports to a
record 10 per cent. Imports fell to an estimated $34 billion (Rs. 2.23 lakh crore) in 201415, but PM Modi is looking to cut that further.
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STATEMENT OF THE PROBLEM

This Study will help us to understand the consumers perception about Gold Schemes by PM
Narendra Modi. This study will help the companies to understand, how a consumer selects,
organizes and interprets the Quality of service and product offered by Government.
NEED FOR THE STUDY

1) The deeper the Government understands of consumers needs and perception, the earlier the
product is introduced, the greater the expected contribution margin. Hence the study is very
important.
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2) Consumer markets and consumer buying behavior can be understood before sound product
and marketing plans are developed
3) This study will help Government to customize the service and product, according to the
consumers need.
4) This study will also help the Government to understand the experience and expectations of the
existing customers.
SCOPE OF THE STUDY

The opening of gold deposit accounts shall be subject to the same rules with regard to customer
identification as are applicable to any other deposit account. Depositors who do not already have
any other account with the designated bank, shall open a gold deposit account with the
designated banks with zero balance at any time prior to tendering gold at the CPTC after
complying with KYC norms as prescribed by Reserve Bank of India.
The designated banks will credit the STBD or MLTGD, as the case may be, with the amount of
995 fineness gold as indicated in the advice received from CPTC, after 30 days of receipt of gold
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at the CPTC, regardless of whether the depositor submits the receipt for issuance of the deposit
certificate or not.
The objective of introducing the modifications in the schemes is to make the existing schemes
more effective and to broaden the ambit of the existing schemes from merely mobilizing gold
held by households and institutions in the country to putting this gold into productive use. The
long-term objective which is sought through this arrangement is to reduce the country's reliance
on the import of gold to meet domestic demand.
OBJECTIVES OF THE STUDY

One of the objectives of a Gold MONETISATION Scheme is to unlock the value of this nonproductive asset. The unlocked value can be routed/circulated to productive assets like Real
Estate, Financial investments like Stocks, Debt, MF etc. For a healthy economy, the contribution
of non-tangible assets like financial investment should be at least 40%. Whereas Indians believe
in investments in tangible assets like Gold and Real Estate. Gold MONETISATION Scheme will
help to correct this skew through redemption option. Interest Payment option under this scheme
will be valued in gold. For example, if i open Gold Savings Account & deposit 100 gms gold.
Assuming the interest rate is 2% then i will get 102 gms of gold at maturity. The objectives of
24
this scheme are to mobilize the gold stored in households and institutions across the country,
allow jewellers to borrow gold as raw material easily, and allow for less import requirements of
gold.
RESEARCH METHODOLOGY
INTRODUCTION:
Methodology is a systematic way of solving a problem it includes the research
methods for solving a problem it includes the research methods for solving the problem.
Type of research
- Descriptive research
Data source
-Primary and Secondary data

25
Data collection method
-Interview and survey
Data collection tools
-Questionnaires
Sample size
-45
DATA SOURCE
The task of data collection begins after a research problem has been defined. In this study
data was collected through both primary and secondary data source.
A. PRIMARY DATA
A primary data is a data, which is collected for gathering information first time and to
analyze the problem. In this study the primary data was collected among the consumers using
questionnaire.
B. SECONDARY DATA
Secondary data consist of information that already exists somewhere, having been
collected for some other purpose. In this study secondary data was collected from company
websites, magazines and brochures.
SAMPLE DESIGN
The target population of the study consists of various respondents of various places.
This survey was done by collecting the data from the respondents.
SAMPLE SIZE
After due consultation with the company supervisor as well as with the college guide,
also keeping in mind the requirements of the company for the research, the sample size that was
found to be appropriate for the study was 45.
SAMPLING METHOD
26
The sampling technique that adapted to conduct the survey was Convenient Random
Sampling and the area of the research was concentrated in the city of Erode only. The survey
was conducted by visiting different places like colleges, corporate offices, respondents home
etc...
METHOD OF DATA COLLECTION
The research would be conducted from the source of primary data collection. Secondary data
would help us in knowing the trends prevailing in the insurance market and would help us in
analyzing and interpretation of the primary data.
FIELD WORK
An interview-schedule and well-structured questionnaire is administered to the target
respondents to collect primary data (Copy of questionnaire is attached in the appendix).Open and
close ended questions are used in the questionnaire. The order of the questions is in such a
manner that they begin with simple questions and lead on the questions that needed more
involvement from respondents. The secondary data are collected from periodicals, magazines,
journals and internet.
Questionnaire
1. Are you aware about the gold scheme launched by our PM?
27
From the sample size of 45, 34 samples were aware about the scheme which is a good indication,
but the other 11 were not aware. This also indicates that awareness of the same needs to be done.
Anova: Single Factor

SUMMARY
Groups
Row 1
Count
Sum
Average
45
2
28
22.50
Variance
160
Row 2
45
22.50
262
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
2508
2508
df
MS
2
10
14
0
259.4
F
0
P-value
F crit
1 1.866081
The F Value is much less than the critical or table value which shows that customers consider
all the attributes as important while rating their satisfaction. Therefore the hypothesis that
customers consider all the attributes important while rating their satisfaction stands accepted.
The difference in the sample is due to random sampling error.
2. If yes, do you accept his view?
29
The population for this question was 45. The question was answered by the same sample,
the outcome of the same was that 32 samples agreed with the question and out of 45, 13
disagreed with the same. This shows although the scheme was launched more then 30%
did not agree with the same.

SUMMARY
30
Groups
Count
Row 1
Row 2
Sum
Average
45
45
22.50
22.50
Variance
160
262
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
2508
2508
df
MS
2
10
14
0
259.4
P-value
F crit
0
1 1.866081
The F Value is much less than the critical or table value which shows that customers consider all
the attributes as important while rating their satisfaction. Therefore the hypothesis that customers
consider all the attributes important while rating their satisfaction stands accepted. The difference
in the sample is due to random sampling error.
3. Do you think banks will safeguard the gold kept with them?
31
The sample size was 45, out of the total sample more than 80% of the population agree with the
question, that is 35 samples said yes and the rest 10samples did not agree with the question. This
also indicates that from the research done on the restricted group still more than 80% of the
population believe that banks are safe, and gold scheme subscription will be trustworthy.

SUMMARY
Groups
Count
Sum
32
Average
Variance
Row 1
Row 2
45
45
22.50
22.50
160
262
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
2508
2508
df
MS
2
10
14
0
259.4
P-value
F crit
0
1 1.866081
4. Will this scheme help India to improve its economic conditions?
33
The total sample of 45, out of which 26 samples agreed that due to launch of such scheme Indian
economy will improve. The conditions will help India for betterment of Indian economy
resulting in rapid growth of the economy. While on the other hand 13 samples still felt that the
Indian economy will not improve with the launch of such scheme. And the remaining 6 felt
neutral, that is neither yes or no.

SUMMARY
34
Groups
Row 1
Row 2
Row 3
Count
Sum
Average
45
45
45
3
3
Variance
15
15
15
160
262
280
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
3668
3668
df
MS
3
15
15
0
360.8
P-value
F crit
0
1 1.866081
35
5. What
is
the
rationale
behind
such
scheme?
This talks about the thought process of the sample taken into consideration. Out of 45 sample
size, 12 believed that such launch of scheme will help to put the additional gold/ surplus gold
into productive use. Later 10 of the population had an opinion that the launch of such scheme
will reduce governments borrowing cost, which indeed is one of the vital motive behind this
scheme launch.
36

SUMMARY
Groups
Count
Row 1
Row 2
Row 3
Row 4
Row 5
Sum
Average
11.25
11.25
11.25
11.25
11.25
45
45
45
45
45
5
5
5
5
5
Variance
160
262
186
206
186
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
3368
3368
Df
MS
3
10
14
0
259.4
P-value
F crit
0
1 1.866081
37
6. This scheme can be replaced with
The question felt the need of other alternative product that can be used in order to replace gold.
The population reaction for such issue was 12 samples had an replacement with silver followed
by 9 samples in savings, 8 with bonds and so on.
38

SUMMARY
Groups
Row 1
Row 2
Row 3
Row 4
Row 5
Row 6
Count
Sum
Average
Variance
6
6
45
45
7.5
7.5
6
6
6
6
45
45
45
45
7.5
7.5
7.5
7.5
180
262
365
293.5
296.5
299.3
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
3508
3508
Df
3
15
14
MS
0
259.4
P-value
F crit
0
2 2.866081
39
7. Tick the ROI which will be idle for you to invest in such scheme (Duration 1 year to 3
years)
This question is purely based on ones expectation from an investment. This varies from person
to person and cannot be taken as basis for decision making.
40
Groups
Count
Sum
Row 1
45
11.25
566
Row 2
45
11.25
191.5
Row 3
45
11.25
161.5
Row 4
45
11.25
141.5
ANOVA
Source of
Variation
Between Groups
Within Groups
Total
SS
Average
df
MS
Variance
5568
5568
10
10
259.4
0
P-value
1
F crit
2.620654
41
8. Rate the achievement of this scheme in time horizon of 5 years
The last issue which was answered by the population was that the time horizon required for
success of this scheme, The outcome of the same is that more than 15 had an opinion that the
success shall be in range of 25%-50%, while 13 of them weight this on the scale of 50% - 75%.
Still the awareness needs to be created in order to built trust among the investors.
42

SUMMARY
Groups
Count
Row 1
Row 2
Row3
Row 4
Sum
45
45
45
45
4
4
4
Average
11.25
11.25
11.25
11.25
Variance
160
262
168
186
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
0
2508
2508
df
MS
4
10
14
0
259.4
F
0
P-value
F crit
1 1.866081
43
HOW GOLD SCHEMES WORK FOR INDIANS AND INDIA

While launching the gold schemes Prime Minister Narendra Modi pointed to women
empowerment implicit in gold. A day later he addressed the Delhi Economic Conclave. Noting
Indias cultural affinity for gold, he made five points on the Indian gold economy. One, the
micro economic virtue of gold can become the macro economic vice of high gold imports.
Two, the gold schemes turn dead money locked in gold towards productive purposes. Three, gold
schemes will provide, besides protection against inflation, modest interest without holding gold
on hand. Four, when the schemes reach their potential, they will help meet the rational
expectations of the people and moderate gold imports. Five, the schemes are reforms which have
the potential to transform.
Feminine economics
What the Prime Minister did not say but should have is that the gold schemes unveiled are
entirely indigenous in thought and conception. In the US/West masculine approach to gold, such
a feminine economic view of gold would have been laughed out. The Indian economy is
feminine in its soul. High savings, moderate consumption, risk-free investments and family
structure all point to the feminine character of the Indian economy. Modern economics is
masculine. The gold schemes are in line with the philosophy of NITI Aayog. Modis cabinet
directs the NITI Aayog to zero in on what will work in and for India. The Modi cabinet
cautions the new thinktank that, No single model can be transplanted from outside into the
Indian scenario and says, We need to find our own strategy for growth.
How do the three gold schemes work for the people at the micro level and the nation at the
macro level?
44
Gold Deposits
The gold stock in India is estimated at between 22,000 tons to as much as 40,000 tons. In the last
18 years (1997-2015) alone, Indias gold imports have topped 15,000 tons. Studies show that a
third of the imports, 5,000 tons, is for investment and not ornaments. It means that some 5,000
tons should be in the form of coins, bars or biscuits. The value of 5,000 tons is over $160 billion
(Rs 11.5 lakh crore). This gold is precisely the target of Modis Gold Deposit Scheme.
The Scheme aims to draw the idle gold stock with the people into the monetary system. One can
deposit gold into banks for fixed periods, like one makes fixed cash deposits. On maturity, the
gold depositor gets cash, equivalent to the value of the gold at the time of maturity. The
depositors of gold also get interest of 2.5 per cent per annum on the value of the gold at the time
of the deposit. With the cash they get on maturity of the deposit they can buy the same quantum
of gold they had deposited earlier. The benefit to them is they earn interest by depositing the gold
coins or biscuits or bar.
What will banks do with the gold they get? They may sell or lend the gold for minting to the
India Gold Coins Minerals and Metals Trading Corporation of India or sell it to jewellers or other
designated banks or lend it to them. To whatever extent the government mobilises gold under the
scheme, to that extent it will reduce imports and add to forex reserves.
45
Sovereign Bonds
Next is the sovereign gold bond scheme with different maturities. Under the bonds scheme the
person who buys the bonds, in substance, buys gold. If somebody needs 25 sovereigns of gold
for a wedding years later, instead of buying gold and putting it in a safe vault, he can buy the
sovereign bond with a maturity of 10 years by paying the gold value today. On maturity he will
get in cash the value of the gold at that time, so that he can buy 25 sovereigns in the market. He
would earn interest of 2.75 per cent per annum which he could not have if he had brought gold
instead of bonds. But the maximum limit upto which a single person can buy is 500 grams. The
Reserve Bank of India issues these bonds on the strength of its gold reserves. The third is the
India Gold Coins scheme under which the government sells gold coins of highest purity to the
people. This is an open confession that the state was wrong in making smugglers to do it for
decades.
Mutually supportive
The gold deposit, gold bonds and gold coins schemes are mutually and reciprocally supportive.
How? By the deposit scheme, private gold becomes available with banks for sale as India Gold
Coins or to jewellers or to be lent to other banks. Just as the deposit of monies into banks that is
lent to borrowers, the gold deposited is sold or lent. If the banks sell the gold and the price of
gold rises before maturity, the banks will, of course, have to shell out more money to the
depositor. But, when the banks sell the gold, they lend the cash realised to borrowers at a higher
interest of 10 per cent but pay only 2.5 per cent to the gold deposit holder. The margin is
sufficient for both of them for buying gold in a forward market to protect against price rise and
make profits. Under the bond scheme, the RBI sells the Sovereign Gold Bonds as gold
equivalent. The 557 tons of gold in RBIs vaults back the bonds it sells. As the bonds promise
gold on a fixed date in the future, the buyers of gold need not buy gold today. This will dent the
current demand and imports of gold. If Indias imports (which constitute a third of the gold
mined in the world) fall, the world gold prices will fall and then the RBI can buy gold cheap and
stock it. Rise in gold prices will affect the RBI but it can buy gold in forward and hedge against
losses. If prices fall, the RBI pays less on maturity. The interest rate on the bonds at 2.75 per cent
46
being less than the bank rate of 6.75 per cent the RBI gains straight away. This is the wisest,
most risk-free and profitable way of monetising the gold with RBI without losing the gold stock.
The three schemes put together are a package on gold each one supplementing and supporting
the other. The three schemes make gold equal to cash or cash equivalent security which will be
more universally accepted in India than any stocks or bonds. The ready domestic demand for
gold makes gold a golden asset. (Note that there is no such mass demand for gold in the West)
Also Gold is equal to the Dollar, Euro and Sterling namely foreign exchange. Gold is thus an
asset and a security for the people and forex for the nation. The RBI earns some 2.5 per cent on
foreign exchange holdings of over $300 billions and it earns nothing on its own gold stocks.
Now it will earn on gold also, by issuing bonds against it. This will enable the RBI to increase
the share of gold in its forex stocks, which will, in turn, scale up all three schemes.
Collectively the schemes have the potential to change the gold habits of the people to access
gold without possessing it. It will also institute a more India-friendly and feminine gold
economy.
A Caveat: the government should not tax the difference between the value of gold when a
person deposits gold or buys the gold bond and the value at maturity, provided the depositor or
bond holder buys gold on maturity of the deposit or bond. This is because if he had bought gold
and kept it, he would not be paying capital gains tax. Of course he should pay tax on the interest
he receives.
47
RBI issues Gold MONETISATION Scheme Guidelines for Banks

The Reserve Bank of India (RBI) issued directions for banks on implementation of the gold
scheme approved by the government last month with the objective of monetizing Indias massive
private holdings of the precious metal.
Interest and principal payments on gold deposits under the scheme will be denominated in gold,
RBI said. Banks can use the stock of gold they collect as part of their statutory liquidity ratio
(SLR) requirement, under which they have to make 21.5% of their investments in government
bonds.
Gold deposits will be subject to cash reserve ratio (CRR) requirements under which banks now
have to maintain 4% of deposits as interest-free buffer with the central bank. Its not clear
whether it will be 4% of the gold deposits or whether it will be calculated after adding the value
of the gold to the overall deposit base.
Banks had suggested that the gold deposits be counted towards existing cash reserve ratio
requirements, but this suggestion has not been accepted by the RBI, said Soumya Kanti Ghosh,
chief economist at State Bank of India.
That would have made it more viable for the banks. It is unclear how viable the scheme will be
and whether interest rates on the scheme will be high enough to draw significant interest, he
added.
The government announced the gold MONETISATION scheme on 15 September to mobilize
gold held by households and institutions and facilitate its use for productive purposes and, in the
long run, to reduce Indias reliance on the import of gold. Holdings of gold in the country are
estimated at 20,000 tonnes.
The gold MONETISATION scheme will use Indias passion for buying gold and turn it into a
productive asset which will flow through the formal banking system. Apart from that, it will also
help in building infrastructure around gold management and recycling in India, which are all
essential in the current scenario, said Somasundaram P.R., managing director, World Gold
Council (India).
48
RBI said banks will be allowed to accept three kinds of deposits under the schemea short-term
deposit with maturity ranging between one and three years; a medium-term deposit with a five to
seven year horizon; and a long-term deposit maturing in 12-15 years.
Banks can accept short-term gold deposits on their own account; the medium and long-term
deposits will be accepted on behalf of the government, RBI said.
There will be a provision for premature withdrawal subject to a minimum lock-in period and the
penalty thats payable will be determined by individual banks.
Resident Indians, including individuals, trusts, mutual funds and exchange-traded funds
registered with the Securities and Exchanges Board of India, can make deposits under the
scheme, the regulator said.
Banks can accept a minimum of 30g of raw gold of 995 fineness in the form of a bar, coin or
jewellery under the scheme. There is no upper limit on the amount of gold deposit.
The gold will be accepted at the collection and purity testing centres (CPTC) certified by
Bureau of Indian Standards and notified by the central government under the scheme, the
guidelines said.
Banks accepting gold under the short-term category can sell or lend it to state-owned MMTC Ltd
or jewellers. The banks may also choose to lend it to other banks participating in the scheme.
The gold deposited under medium- or long-term deposits will be auctioned by MMTC or any
other agency authorized by the central government and the sale proceeds credited to the
governments account with RBI.
Designated banks should put in place a suitable risk management mechanism, including
appropriate limits, to manage the risk arising from gold price movements in respect of their net
exposure to gold, RBI said.
The list of CPTCs and refiners is under finalization and will be notified by central government
soon. Indian Banks Association is finalizing the necessary documentation including the tripartite
agreements to be entered into by the designated banks, CPTCs and the refiners under the scheme.
49
Banks are also putting in place the requisite systems and procedures to implement the scheme.
The exact date of implementation will be announced by RBI in the next few days, the regulator
said.
Indians are amongst the worlds biggest consumers of gold. They invest mostly in the physical
form. However gold investors keep this precious metal unused. They either keep it safe in a bank
locker or at home which ultimately loses its monetary value since it does not generate income
unless it is sold at a higher price. Keeping this in mind, Prime Minister Shri Narendra Modi will
launch four gold related investment schemes on 05 November, 2015:
1. Gold MONETISATION Scheme

2. Gold Coin Scheme
3. Sovereign Gold Bond
4. Gold Bullion Scheme
Lets explore gold MONETISATION scheme in detail which will earn interest on the idle gold:
Benefits to Investor: Gold deposited will earn interest.
Benefits to the Indian economy: Another benefit of this scheme is that Indias need of importing
the gold will be reduced. This will strengthen Indias economy as expense on importing the gold
will be reduced because the deposited gold will be re-circulated which will directly cut the
import.
50
What type of gold can be deposited: Individuals can deposit gold bars, coins, and jewelleries.
However if the jewelry has embedded stones then it cannot be deposited.
Tenure: Investors are offered following three types of deposits or tenure options as a part of this
gold MONETISATION scheme:
1.
Short term tenure: Matures between 1-3 years
2.
Medium term tenure: Matures between 5-7 years
3.
Long term tenure: Matures between 12-15 years
Interest Rate: RBI has allowed banks to fix their own interest rate similar to the savings bank
interest rate. The short term deposits will fetch 2.25 per cent interest on current price of gold
while the long term investment would fetch 2.5 per cent interest.
Minimum Investment Limit: Gold which weighs 30 grams of 995 fineness is mandatory.
Maximum Investment Limit: There is no maximum limit for depositing under this scheme.
Who will verify the authenticity of the gold? To prevent fraudulent activity, each and every gold
product will be tested by collection and purity testing centres. Government of India will provide
the list of authorized centers.
Who can deposit under gold MONETISATION scheme? Residents of India, Hindu undivided
family, mutual funds and exchange trading funds registered under securities and exchange board
of India (SEBI) can deposit under GMS.
Is joint deposit allowed? Yes. And to avoid complexing the deposit process, the rules applicable
to the joint account holders in a normal bank account also applies to the GMS scheme. Minimum
2 persons are required for joint deposit and there is no cap on maximum person.
Where can you deposit? Reserve Bank of India has allowed all the scheduled commercial banks
to offer the scheme.
Is premature withdrawal possible? Yes, but only after the minimum lock-in period.
Is there any penalty when deposits are withdrawn prematurely? Yes and it would be fixed by the
respective bank.
Is the interest taxable? Yes, interest earned on the gold deposit is taxable as per the Income tax
act, 1961.
51
PROCESS OF DEPOSIT
1.
Documents required for account opening: All the documents for verification i.e. know
your customer (KYC) would be required i.e. address proof, ID proof and passport size
photograph. If more documents are required then the same would be asked by the
respective banks.
2.
Once verification is done, depositor will have to approach the government authorized
Collection and Purity Testing Centres (CPTC). Banks will provide this list to the depositor.
3.
CPTC will then perform a detailed assessment of the gold and upon successful
verification they will issue a receipt which is signed by the authorized signatories of their
center.
4.
Depositor will then have to submit the receipt in the bank. They will issue a final deposit
certificate to the depositor which will also contain the tenure for which the deposit is
made.
5.
How will the principal and interest get credited? It will be credited in the deposit account
of the individual.
6.
Grievance Redressal: If individuals are not happy with the bank with regards to any
process involved in this scheme then they should first approach the banks grievance
department and then contact banking ombudsman of Reserve Bank of India.
BENEFITS OF GOLD MONETISATION SCHEME

52
Recently GOI released the draft of Gold MONETISATION Scheme. The general public can
share their views on draft Gold MONETISATION Scheme on or before 2nd June, 2015. As usual
my financial planner friends passed their verdict on the Gold MONETISATION Scheme even
before it is launched. In fact, some of them also suggested whether to invest in this scheme or
not. Whereas other passed judgement whether the scheme will be a success or a failure. My dear
friends forgot that Govt has only released the draft of Gold MONETISATION Scheme. Based on
the inputs from the general public, banks and all other stakeholders the final scheme will be
launched. The final scheme may or may not retain the draft provisions. There is a possibility that
final Gold MONETISATION Scheme might be completely different from the draft. By passing
their verdict at the draft stage shows the immaturity and lack of understanding. Secondly, most of
the financial planners are passing wrong info to the General Public. They are also responsible for
creating wrong/negative perception about the Gold MONETISATION Scheme even before it is
formally launched.
Gold is a Non-Productive Asset

53
As i highlighted in my post, Dream Home vs Gold Productive vs Non-Productive Asset that

Gold is a Non-Productive Asset. At best, Gold in a financial portfolio act as a hedge against
inflation. It should not be more than 15%-20% of the financial portfolio. According to rough
estimates, Indian household and other trusts are holding 20,000 tonnes of Gold. It is not a good
scenario for any economy. One of the objectives of a Gold MONETISATION Scheme is to
unlock the value of this non-productive asset. The unlocked value can be routed/circulated to
productive assets like Real Estate, Financial investments like Stocks, Debt, MF etc. For a healthy
economy, the contribution of non-tangible assets like financial investment should be at least
40%. Whereas Indians believe in investments in tangible assets like Gold and Real Estate. Gold
MONETISATION Scheme will help to correct this skew through redemption option. Interest
Payment option under this scheme will be valued in gold. For example, if i open Gold Savings
Account & deposit 100 gms gold. Assuming the interest rate is 2% then i will get 102 gms of
gold at maturity.
Black Money and Gold MONETISATION Scheme

54
Its a known fact that Gold & Real Estate were safe havens to park Black Money. Gold
MONETISATION Scheme is a good way to unlock the black money parked in the form of a
gold. As the Gold returns are in negative territory therefore timing of the Gold MONETISATION
Scheme is strategic. Currently, hoarders are also finding ways to either exit or convert it into a
sort of productive asset.
Current Account Deficit

Depending on the success of Gold Scheme, it will increase the supply of Gold in the market.
Which in turn will reduce the import of Gold? Lower import of Gold will help to control the
current account deficit. Current account deficit is not good for the economic health of the
country. It means higher outflow of the dollar compared to dollar inflow from exports. Current
Account Deficit of last 2 years is 4.2% and 4.8% respectively. Indias major import bill is of
Gold and Crude Oil. If import > export then it increases the demand of dollar, therefore,
depreciates Indian Rupee. Depreciation of Indian Rupee will increase the inflation. Gold is a
hedge against inflation therefore in case of high inflation people will buy more gold. The
increase in Gold demand will further increase Current Account Deficit, therefore, its a vicious
cycle. To control this cycle, it is important to control the demand of gold.
Boost to Jewellery Sector

Currently, the big jewelers buy gold from gold importers or trading houses. Small jewelers buy
from big jewelers. Gold MONETISATION Scheme will facilitate the availability of gold through
banks on the loan. Gold will be treated as a Raw material for Jewellery sector. Thus, it will finish
the monopoly of gold importers. Secondly, if the jeweler will buy gold on loan from the bank
then it will slowly bring the stability in Gold Prices. Speculators will be out of business. Banks
can also convert the gold deposited under Gold Savings Account to Gold Coins and sell to their
customers.
Gold Prices will come down

55
If Gold MONETISATION Scheme is successful then there will be a sudden increase in the
supply of gold which in turn will decrease the Gold Price. Therefore, Gold MONETISATION
Scheme is a good news for people who are waiting to buy gold at the lower price provided the
scheme is a success. It has a flip side also. The drop in Gold price may result in out of proportion
increase the demand which will defeat the whole purpose of launching this scheme. Therefore,
the government should control the gold deposits in Gold Savings Account.
Conclusion: It will be interesting to note how the govt will handle the black money converted
to gold. Whether Gold MONETISATION Scheme will be sort of amnesty scheme for general
public to declare unaccounted gold lying in the lockers. Secondly, Gold is a Womens best friend
and is mostly in the form of jewellery. At the time of purchase, jewelers cheat and the final cost
is almost 20%-25% higher compared to the actual cost due to making charges, wastage etc. I
highlighted in my post, How Jewellers Cheat Customers. Therefore, it will be a double penalty if
the ornaments and jewellery will be deposited under Gold Savings Account as the investor will
receive only Gold Value.
GOLD MONETISATION SCHEME TO HELP INDIVIDUALS EARN

INTEREST ON GOLD BARS, JEWELLERY DEPOSITS
56
In an attempt to cut down the import bill, the Reserve Bank of India on Thursday announced a
gold monetisation scheme which allows individuals to deposit gold bars or jewellery with banks
and
earn
interest
on
it.
In a notification on its website, the RBI said that individuals, trusts and mutual funds would be
eligible to deposit gold with banks. The minimum amount deposited has to be 30 grams of 995
fineness. The central bank however, has not fixed any upper limit on the amount that can be
deposited under the scheme. The RBI has said that the principal and the interest of the deposit
under the scheme has to be in denomination of gold.
Gold comprises the bulk of India's total imports with close to 900 to 950 tonnes of gold imported
every year. It is estimated that close to 22,000 tonnes of gold is lying in Indian household. If the
ideal gold is deposited with banks it will enable banks to on lend it to jewellers, thereby reducing
demand to import gold.
Banks can accept gold deposits for a short term (1-3 years) as well as medium term (5-7 years)
and long (12-15 years) term. The short term deposits of gold will be accepted by banks on their
own account, while the medium and long term deposits will be on behalf of government. RBI has
said that banks would have to permit premature withdrawal subject to a minimum lock-in period
and penalty that can vary from bank to bank. Interest on deposits under the scheme will start
accruing from the date of conversion of gold deposited into tradable gold bars after refinement or
30 days after the receipt of gold at the Collection and Purity Testing Centres. RBI has said that
the short term bank deposits will attract cash reserve ratio ( CRR) and statutory liquidity ratio
(SLR). At the same time, the stock of gold held by the banks will be factored in meeting the SLR
requirement.
Banks
to
get
2.5%
commission
under gold
57
monetisation
scheme
The government has modified the gold monetisation scheme in a bid to make it more attractive.
The finance ministry on Sunday said the government will pay banks a 2.5 per cent commission
for mobilising gold under the scheme and depositors will be permitted premature withdrawal of
gold.
"It is expected that modifications will make the scheme more attractive for potential depositors,"
said
statement
announcing
multiple
changes.
The scheme, designed to bring out some of the estimated 20,000 tonne of domestic gold to
reduce
imports,
has
so
far
mobilised
900
kg
of
gold.
Under new rules, banks will get a few incentives for gold purity testing charges, refining, storage
and transportation charges and other costs. "Effectively, banks would be getting a 2.5 per cent
commission, which will include charges payable to collection and purity testing centres/refiners,"
the
statement
said.
Depositors will earn up to 2.50 per cent interest per annum on deposit and, under new rules, they
will be allowed premature withdrawal. "A mediumterm deposit will be allowed to be withdrawn
after three years and longterm deposit after five years. These will be subject to a reduction in the
interest
payable,"
the
statement
added.
Further, depositors can now give their gold directly to the refiner rather than only through
collection and purity testing centres. "This will encourage the bulk depositors, including
institutions, to participate in the scheme," it added. Bureau of Indian Standards has also modified
licensing condition for refiners from the existing three years of refining experience to one year.
58
How does the gold monetization scheme announced in the Union Budget 2015 work?
How will the funds be handled so that the increase in gold prices does not bring a
huge loss to the government?
The Union Cabinet recently approved gold monetization scheme and Sovereign Gold Bonds. The
Main objective behind the launch of gold monetization scheme and Sovereign Gold Bonds is to
reuse the household gold which lying in lockers & cupboards of Indian homes. and also reduce
reliance
on
import
of
gold.
This gold monetization scheme and Sovereign Gold Bonds scheme will help in reducing the
demand for physical gold. As we know most of the demand for gold in country is met through
imports, this scheme will help in maintaining Indias Current Account Deficit in limits.
59
Markets regulator Sebi today allowed gold exchange-traded funds (ETFs) to invest up to 20 per
cent of their assets in the government's ambitious Gold Monetisation Scheme.
The government, in November, launched gold monetisation scheme to rein in demand for
physical
gold
and
contain
its
import.
Through the Gold Monetisation Scheme (GMS), gold in any form can be deposited with banks
for a period of 1--15 years that will earn interest while redemption will be at the prevailing alue
at
the
end
of
the
tenure.
The new scheme will replace the Gold Deposit Scheme (GDS) 1999 (GDS). However, the
deposits outstanding under the GDS will be allowed to run till maturity unless these are
withdrawn by the depositors prematurely.
The Securities and Exchange Board of India (Sebi) said existing investments by Gold ETFs of
Mutual Funds under the GDS will be allowed to run till maturity unless these are withdrawn
prematurely.
Gold ETFs are open-ended funds that trade on a stock exchange like any other share of a
company and track closely the price of physical gold.
Each unit of the ETF is equivalent to one gram of gold and it gives an opportunity to investors to
accumulate
gold
over
period
of
time.
In a circular, Sebi said cumulative investment by Gold ETF in Gold Monetisation Scheme will
not
exceed
20
per
cent
of
total
AUM
of
such
scheme.
Besides, Sebi said that all other conditions applicable to investments in GDS of banks will also
be applicable to investments by Gold ETFs in GMS.
60
The Reserve Bank of India may make the gold monetisation scheme simpler to give it a push as
the plan to collate idle gold from households has failed to take off in its current form. The bank
may remove one layer of the gold tendering process or make it optional, two people familiar with
the development said. This is going to make life much simpler for designated banks and bulk
gold depositors like Tirumala Tirupati Devasthanams or Shri Saibaba Sansthan Trust of Shirdi.
The scheme was launched on November 6 by Prime Minister Narendra Modi but it has not seen
any momentum whatsoever due to procedural glitches. According to the plan that has now been
envisaged, banks would be allowed to deposit the tendered metal directly at refineries, instead of
involving collection and purity testing centres (CPCT). The present rule says that each
designated bank can authorise a CPTC to collect deposits of gold on its behalf. These centres
then deposit the gold at refineries. However, none of the centres enlisted in the scheme are
equipped
to
handle
bulk
volumes
of
gold
on
daily
basis,
bankers
said.
"In the last meeting with banks and jewellers, the RBI gave a verbal commitment, saying
depositing gold at CPCTs would be made optional. So, banks and customers have the choice
whether to place gold with CPCTs or refineries directly," said an executive who attended the
meet on November 18. "This could be a gamechanger," he said.
CPCTs will examine the purity of gold by a fire-assaying process and issue certificates to
depositors and banks. But just about 33 CPCTs are enrolled in the scheme across India so far,
while banks and jewellers have pointed out that most CPCTs can only handle up to 50 kilo grams
of gold per day and this may come in the way of the scheme making any impact with large gold
hoarders. In the previous gold deposit scheme, which has now been merged with the current one,
there was no involvement of CPCT as well.
The scheme aims at unlocking 20,000 tonnes of idle gold lying with Indian households and
thereby reducing country's dependence on imported gold and addressing the issue of current
account deficit. India imports 900-950 tonnes of gold annually to meet local demand. There are
two different types of plan under the latest gold scheme one is short-term and the other one is
a mediumand long-term.
61
1. Gold Monetisation Scheme (GMS) allows jewelers and investors to deposit physical gold in
banks. This scheme allows Rich Temples of india to deposit the gold in the bank.
EgPadmanabhamswamy temple kerala, Tirupati Balaji temple, Saibaba temple shirdi etc.
2. This scheme is nothing but the fixed deposit scheme for gold. Like you keep your gold in the
bank and earn interest on it.
3. Gold bonds will be issued with a rate of interest to be decided by the government. Interest will
be calculated on the value of gold deposited at the time of investment.
4. Investor has to deposit minimum 30 grams of gold in-order to earn interest on deposit.
5. The bank/ govt will melt the deposited gold and it kept as a bullion.
6. If you give return preference as a gold interest will be given as a gold. For example, if you
deposit 100 gms of gold and get 1% interest, on maturity will receive 101 gms.
7. The minimum deposition period for the Gold monetization scheme is 1 year and maximum 5
years.
8. just like fixed deposit you can break the gold deposits also.
9. No information of income tax exemption of such gold deposit yet. stay tuned. once I come to
know i will post it here.
10. Gold collected through the scheme will be made available to jewelers for manufacturing of
new jewelery and other items.
How Gold Monetization Scheme (GMS) works?

62
Gold Deposits:
In this GMS customer can bring the gold in any form either ornaments, rings, bullions, gold bars
etc. The gold deposit account will be opened by banks. The collection center will verify purity
and assess the value of gold. This center will inform bank about value to be credited in the
customer account. Then bank will melt the gold and will convert it in to bars. The customer will
be pad interest amount OR gold as per the scheme on maturity.
Gold Savings Account:

When the customer produces the certificate of gold deposited at the Purity Testing Centre, the
bank will in turn open
a Gold Savings Account for the customer and credit the quantity of gold into the customers
account. Simultaneously, the Purity Verification Centre will also inform the bank about the
deposit made.
Interest Payment by Banks:

The bank will commit to paying an interest to the customer which will be payable after 30/60
days of opening of the Gold Savings Account. The amount of interest rate to be given is
proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors
of gold, will be valued in gold. For example if a customer deposits 100 gms of gold and gets 1
per cent interest, then, on maturity he has a credit of 101 gms.
Redemption:
The customer will have the option of redemption either in cash or in gold, which will have to be
exercised in the beginning itself (that is, at the time of making the deposit).
Tenure:
63
The tenure of the deposit will be minimum 1 year and with a roll out in multiples of one year.
Like a fixed deposit, breaking of lockin period will be allowed.
Tax Exemption:
In the Gold Deposit Scheme (1999), the customers received exemption from Capital Gains Tax,
Wealth tax and Income Tax. Similar tax exemptions are likely to be made available to the
customers in the GMS after due examination.
Lending the Gold to the Jewelers:

Gold Loan Account:
The jewellers, on the basis of the terms and conditions of the banks, will get a Gold Loan
Account opened at the
bank.
Delivery of gold to jewellers:

When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from the
refiners. The banks will in turn make the requisite entry in the jewellers Gold Loan Account.
The banks can directly get gold from the international market on a consignment basis and lend it
to the jewellers. If this route is more lucrative, then the entire purpose will get defeated. Thus,
this aspect will also have to be kept in mind, while deciding the interest rate.
Gold Monetization Scheme Will it impact the imports of gold?
During the announcement of the Budget of 2015-16, Finance Minister Arun Jaitley announced a
new scheme, the Gold Monetization Scheme, to replace the Gold Deposit and Gold Metal Loan
scheme. This new scheme allows the depositors of gold to earn interest on their metal accounts
and jewellers to get loans on these accounts.
64
Along with this, a new financial asset, called as Sovereign Gold Bonds were announced as an
alternative to purchasing metal gold. These bonds carry a fixed interest rate (2.75%), and are
redeemable at the face value of the gold (at the time of redemption).
The objectives of this scheme are to mobilize the gold stored in households and institutions
across the country, allow jewellers to borrow gold as raw material easily, and allow for less
import requirements of gold.
How it works?
65
In the first step, the customer approaches a Purity Testing Centre, a BIS (Bureau of Indian
Standards) certified centre located in most states across the country and submits the gold in form
of bullion or jewellery (Minimum 30gms of gold required). A preliminary XRF machine test
(45 min) is carried out to estimate the amount of pure gold.
If the customer agrees, he will fill up a form for allowing the melting of gold. Next comes the
Fire Assay Test (3-4 hours), in which the ornaments are cleaned of studs, meena etc. and are
handed over to the customer directly. From a viewing gallery, the customer will be able to
observe the melting process. Finally the results of the fire assay will be given to the customer and
he can either choose to accept the gold in form of gold bars and pay a small fee, or can choose to
open a Gold Savings Account. In case he chooses to deposit the gold, he will be given a
certificate pertaining to the amount of gold.
Next, he approaches a bank which opens the account for him, in exchange of the given
certificate. The bank credits the quantity in his account. The interest rates can be decided by the
bank and the interest is credit every 60 days in form of gold quantity. For example, 1% interest
on 100gms of gold will have a maturity of 101gms of gold.
The deposit accounts will have a tenure of minimum 1 year (multiple of years) and like fixed
deposits, the breaking of lock-in period will be allowed.
What is done with the deposited gold?

66
The banks may be allowed to use the mobilized gold for CRR/SLR requirements with RBI (still
under consideration). They can also sell the gold to generate foreign currency, convert gold into
coins for sale, buy/sell gold on commodity exchanges and lend the gold to jewellers who will use
it as raw material.
Jewellers
They benefit from GMS in the form of Gold Loan Accounts that they can open with banks.
Once a loan is sanctioned, they receive physical gold from refiners (who are contracted with
banks). The banks will make an entry in that jewellers Gold Loan Account. The interest rate
charged by the bank will cover the interest rate paid to depositors, the fees paid to refiners and
Purity Verification Centres and keep a profit margin.
Coordination
The banks will enter into a tripartite MoU with refiners and purity testing centres that are
selected by them to be their partners in the scheme. It will clearly lay down the details regarding
payment of fee, services to be provided, standards of service and the details of the arrangements
between the banks, refiners and purity testing centres.
LIMITATIONS
67
1. Useful Investment insights are not easily available.

2. Due to time constraint sufficient research on all the investment tools is difficult.
3. The survey sample is not very large for analysis
.
4. Properly convincing people to invest in Gold Schemes is challenging.
5. Due to recession there is liquidity crunch in the market.
6. There might have been tendencies among the respondents to amplify or filter their
responses under the testing conditions
.
FINDINGS
68
The findings that can be drawn from the survey conducted by us can be summarized in the
following way:
The majority of respondents belong to the age group of 19 to 28 years

with 56% followed by age group of 29 to 38 years with 18%.
The male consumers capture the Market share with 74%, followed by
the female consumers with 26%.
The majority of the consumers of are private employees with48% and

Government employees with 40%
The factors which influenced to buy Government Gold Scheme is the

personal factor, followed by family, friends, agents and
advertisements.
Majority of the people (52%) prefer to invest in bank others (48%)

prefer to invest in insurance company.
Majority of consumers are satisfied with the service and quality of

products of their life insurance companies.
Majority of consumers (78%) would like to communicate the service

offered by Government.
69
CONCLUSION
It will be interesting to note how the govt will handle the black money converted to gold.
Whether Gold MONETISATION Scheme will be sort of amnesty scheme for general public to
declare unaccounted gold lying in the lockers. Secondly, Gold is a Womens best friend and is
mostly in the form of jewellery. At the time of purchase, jewelers cheat and the final cost is
almost 20%-25% higher compared to the actual cost due to making charges, wastage etc. I
highlighted in my post, How Jewellers Cheat Customers. Therefore, it will be a double penalty if
the ornaments and jewellery will be deposited under Gold Savings Account as the investor will
receive only Gold Value.The banks are likely to pay about 2% interest on the gold they take as
deposit from its depositors. This creates a huge Net Interest Margin for banks as the average
lending rate for the banks is about 12-13%. This comes as a cost for risking their position for the
increase in the value of the gold over the lock-in period.
For example, if banks take deposits of Rs. 1 crore at the current price of Rs. 1000 per unit of
gold. This amounts to 10,000 units of gold deposited into the banks. Now at an agreed lock-in
70
period of 1 year at 2% interest rate, banks will have to return 10,200 units of gold to its
depositors.
Now suppose the price of gold is Rs. 1100 per unit of gold. The bank will have to repay Rs.
1.122 crore (10,200 units @ Rs. 1100 per unit) worth of gold after one year, virtually earning
nothing as the lending rate of loans that the bank gives is 12%. They instead made a nominal loss
of 0.2% over one year if the average lending rate is about 12%. The real loss in terms of goods
will be greater.
In the same way, the price of gold can reduce to Rs. 900 per unit. Now the banks will have to
repay only Rs. 91.8 lacs (10,200 units @ Rs. 900 per unit) worth of gold after one year, hence
earning an effective annual return of Rs. 12 lacs on the loan they give out at 12% interest rate
and Rs. 8.2 lacs due to fall in price of gold. This is about 20.8% which is huge.
So the higher NIM may be justified for the higher risks that the bank assumes due to the
fluctuating prices of gold, which are generally in the upper direction. But generally, the price of
gold is not so fluctuating, hence letting the banks earn more in the long run.
Implications for the Jewellers
71
Now instead of keeping gold in physical form, jewellers would prefer to keep their gold in bank
(if it is not going to be used in the short term). Considering the same 2 situations above,
If the price is Rs. 1100 after 1 year, they earned 2.2% above the return on gold; and
If the price is Rs. 900 after 1 year, they lost 8.2% instead of 10% fall in price of gold.
Hence the jewellers are going to be better off in any way the direction of price of gold is in. It is
like inventory giving returns to a business without being converted to sale, rather as being kept in
a bank account.
Implications for the Indian economy

Gold, which is generally considered an assets that sucks money out of the economic system (if
the investment in gold is for the long run), will now be able to generate money flow in the
economy without RBI intervening by its monetary policy. This would have a direct implication
on the IS-LM model.
Due to a current boom being experienced by India, there is a need to increase the money supply
to reduce the crowding out effect with only IS curve shifting to the right. Gold Monetization
Scheme would increase the Money Supply without affecting the actual monetary base or
changing the money multiplier.
Implications for Financial & Capital Market

Indian financial & capital markets are considered to be under-developed. Gold Monetization
Scheme would enhance the availability of funds with banks which can be given out as a loan or
invested as private equity in start-ups, which is a big leap towards development of the financial
& capital market of the country.
Key features of Gold Monetization scheme and Sovereign Gold Bonds.

Gold Monetization Scheme (GMS):
72
1. Gold Monetisation Scheme (GMS) allows jewelers and investors to deposit physical gold in
banks. This scheme allows Rich Temples of india to deposit the gold in the bank.
EgPadmanabhamswamy temple kerala, Tirupati Balaji temple, Saibaba temple shirdi etc.
2. This scheme is nothing but the fixed deposit scheme for gold. Like you keep your gold in the
bank
and
earn
interest
on
it.
be
calculated
on
the
value
of
gold
deposited
at
the
time
of
investment.
4. Investor has to deposit minimum 30 grams of gold in-order to earn interest on deposit.
5.
The
bank/
govt
will
melt
the
deposited
gold
and
it
kept
as
bullion.
6. If you give return preference as a gold interest will be given as a gold. For example, if you
deposit 100 gms of gold and get 1% interest, on maturity will receive 101 gms.
7. The minimum deposition period for the Gold monetization scheme is 1 year and maximum 5
years.
8.
just
like
fixed
deposit
you
can
break
the
gold
deposits
also.
9. No information of income tax exemption of such gold deposit yet. stay tuned. once I come to
know
will
post
it
here.
10. Gold collected through the scheme will be made available to jewelers for manufacturing of
new
How
jewelery
Gold
Monetization
and
Scheme
other
(GMS)
works?Gold
items.
Deposits:
In this GMS customer can bring the gold in any form either ornaments, rings, bullions, gold bars
etc. The gold deposit account will be opened by banks. The collection center will verify purity
and assess the value of gold. This center will inform bank about value to be credited in the
customer account. Then bank will melt the gold and will convert it in to bars. The customer will
be pad interest amount OR gold as per the scheme on maturity.
Gold
Savings
Account:
When the customer produces the certificate of gold deposited at the Purity Testing Centre, the
bank
will
in
turn
open
a Gold Savings Account for the customer and credit the quantity of gold into the customers
73
account. Simultaneously, the Purity Verification Centre will also inform the bank about the
deposit made.
Interest
Payment
by
Banks:
The bank will commit to paying an interest to the customer which will be payable after 30/60
days of opening of the Gold Savings Account. The amount of interest rate to be given is
proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors
of gold, will be valued in gold. For example if a customer deposits 100 gms of gold and gets 1
per cent interest, then, on maturity he has a credit of 101 gms.
Redemption:
The customer will have the option of redemption either in cash or in gold, which will have to be
exercised in the beginning itself (that is, at the time of making the deposit).
Tenure:
The tenure of the deposit will be minimum 1 year and with a roll out in multiples of one year.
Like
fixed
deposit,
breaking
of
Tax
lockin
period
will
be
allowed.
Exemption:
In the Gold Deposit Scheme (1999), the customers received exemption from Capital Gains Tax,
Wealth tax and Income Tax. Similar tax exemptions are likely to be made available to the
74
customers
in
Lending
the
the
Gold
GMS
to
after
the
due
Jewelers:Gold
examination.
Loan
Account:
The jewellers, on the basis of the terms and conditions of the banks, will get a Gold Loan
Account
opened
Delivery
of
at
the
gold
bank.
to
jewellers:
When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from the
refiners. The banks will in turn make the requisite entry in the jewellers Gold Loan Account.
The banks can directly get gold from the international market on a consignment basis and lend it
to the jewellers. If this route is more lucrative, then the entire purpose will get defeated. Thus,
this aspect will also have to be kept in mind, while deciding the interest rate.
SOVEREING GOLD BONDS

1. The sovereign gold bond will enable investors to buy gold certificates from the government,
which
can
later
be
encashed
for
money
or
physical
gold.
be
calculated
on
the
value
of
gold
deposited
at
the
time
of
investment.
3. Gold bonds will be issued in denominations of 5, 10, 50, 100 grams of gold. The cap per
person
per
year
has
been
set
at
75
500
grams,
the
government
said.
4. Duration of such gold bonds will be for minimum of 5 to 7 years to protect investors from
medium
term
volatility
in
gold
prices,
the
government
said.
5. Gold bonds are expected to reduce the demand for physical gold bars and coins by shifting a
part
of
estimated
300
tons
per
annum
for
investment
into
gold
bonds.
6. The risk of change in a price of gold will be borne by the government.

7.
One
can
use
this
bond
for
applying
for
loan
as
security.
8. Banks/NBFCs/Post Offices/ National Saving Certificate (NSC) agents and others, as specified,
may collect money / redeem bonds on behalf of the government (for a fee, the amount would be
as
decided).
9. Bonds to be easily sold and traded on exchanges to allow early exits for investors who may so
desire.
10. Upside gains and downside risks will be with the investor and the investors will need to be
aware
of
the
volatility
in
gold
prices.
This scheme will surely help many Indians and Indian economy. The government have very high
hopes from this scheme. If all temples from India started depositing the their gold reserved with
banks then it will be huge success.
RECOMMENDATION
With regard to Gold Schemes, consumers respond at different rates, depending on the consumers
characteristics. Hence Government should try to bring their new product to the attention of
potential early adopters.
People are not aware of the Gold Schemes. Most of them know only .So awareness campaign
should be run so that people are aware of different Gold Schemes in India.
76
People should be educated about the different types of products. Most of them dont know
much of the different types of plan or products.
Now at the time of global turmoil Gold Schemes had to hold on to the policyholders trust
which might lead the company to the path of success.
Government should try to adopt different strategies to market their products or plan.
Companies should not primarily focus on the agents for their business.
Keeping the cost, quality and return on investment in tact is necessary in order to tackle the
competition.
Return on investment company reputation and premium outflow are most preferred attributes
that are expected by the respondents. Hence greater focus should be given to these attributes.
BIBLIOGRAPHY
www.moneycontrol.com
www.wikipedia.com
www.investopedia.com
www.valueresearch.com
www.ndtvprofit.com
77
Questionnaire
1. Are you aware about the gold scheme launched by our PM?
Yes
No
2. If yes, do you accept his view?
78
Yes
No
3. Do you think banks will safeguard the gold kept with them?
Yes
No
4. Will this scheme help India to improve its economic conditions?
Agree
Disagree
Netural
5. What is the rationale behind such scheme?

putting this gold into productive use
reduce the countrys reliance on the import of gold
reducing the governments borrowing cost
All of the above
79
None
6. This scheme can be replaced with
Bonds
Equity
Savings
Silver
Metal
All of the above
None
7. Tick the ROI which will be idle for you to invest in such scheme (Duration 1
year to 3 years)
As per the norms
5% - 7%
8%-10%
10% - 12%
8. Rate the achievement of this scheme in time horizon of 5 years

0% - 25%
25% - 50%
50% - 75%
75% and above
80
81

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EXECUTIVE SUMMARY

BACKGROUND OF THE STUDY

Revamped Gold Deposit Scheme

Why Is India Promoting Gold Monetization?

BACK GROUND OF TOPIC

How Do Fluctuations In The Gold Rate Affect The Indian Economy?

How does gold investment affect the Indian economy?

Utilization:The deposited gold will be utilized in the following ways:12

(1). Under medium and long-term deposit:

(2). Under short-term deposit:

(3). Tax Exemption:

(4). Gold Reserve Fund:

(5). Revamped Gold Metal Loan Scheme.

(7). Delivery of gold to jewellers:

PM Narendra Modi launches 3 gold schemes

We take a look at all three schemes:

Gold Monetisation Scheme

Few things to know about the scheme

Top 6 Common Uses For Gold

Finances and Investing:

Electronics and Computers:

Dentistry and Medicine:

Medals and Awards:

Few things to know about the scheme

10 Point Guide to Gold Schemes Launched by PM Narendra Modi

STATEMENT OF THE PROBLEM

NEED FOR THE STUDY

SCOPE OF THE STUDY

OBJECTIVES OF THE STUDY

-Primary and Secondary data

Data collection method

-Interview and survey

Data collection tools

Anova: Single Factor

2. If yes, do you accept his view?

Anova: Single Factor

Anova: Single Factor

4. Will this scheme help India to improve its economic conditions?

Anova: Single Factor

Anova: Single Factor

6. This scheme can be replaced with

Anova: Single Factor

8. Rate the achievement of this scheme in time horizon of 5 years

Anova: Single Factor

HOW GOLD SCHEMES WORK FOR INDIANS AND INDIA

RBI issues Gold MONETISATION Scheme Guidelines for Banks

1. Gold MONETISATION Scheme

Short term tenure: Matures between 1-3 years

Medium term tenure: Matures between 5-7 years

Long term tenure: Matures between 12-15 years

BENEFITS OF GOLD MONETISATION SCHEME

Gold is a Non-Productive Asset

As i highlighted in my post, Dream Home vs Gold Productive vs Non-Productive Asset that

Black Money and Gold MONETISATION Scheme

Current Account Deficit

Boost to Jewellery Sector

Gold Prices will come down

GOLD MONETISATION SCHEME TO HELP INDIVIDUALS EARN

How Gold Monetization Scheme (GMS) works?

Gold Savings Account:

Interest Payment by Banks:

Lending the Gold to the Jewelers:

Delivery of gold to jewellers:

What is done with the deposited gold?