Highlights of gold deposit and bond schemes

Highlights of the two gold schemes approved at a cabinet meeting chaired by Prime Minister Narendra Modi: Key points of gold deposit scheme - Minimum amount of gold set at 30 grams - The 331 designated centres to test and collect gold from customers - Gold can be in any form, bullion or jewellery - A Gold savings account to be opened by customers - Account to be denominated in grams of gold - Centres to transfer gold to refiners - Refiners to keep the gold in ware-houses unless banks want to hold themselves - Refiners to be paid a mutually-decided fee by banks - Customer will not be charged. - Scheme available for short-, medium-, long-term periods - Lock-in period can be broken with penalty - Interest rate for short-term deposits to be decided by banks - For medium- and long-term deposits, interest rate to be decided by government - Interest rate to be denominated and payable in rupees, based on gold value - Redumption of short-term deposits in cash or in gold - But fractional quantity to be paid in cash - Redumption of medium and long-term deposits only in cash - Deposited gold can be utilised for auctioning, Central bank's gold reserves, coins, lending - Tax exemptions will also be extended as applicable - Gold reserve fund to be created based on borrowing cost interest rate paid - For jewellers, a gold metal loan account can be opened, denominated in grams of gold - Gold mobilized under short-term option to be provided to jewellers on loan - Delivery of physical gold for jewellers once sanctioned. Key points of sovereign gold bond scheme - Bonds to be issued on payment of rupees and denominated in grams of gold - They will will have a sovereign guarantee - Issuing agency to pay distribution costs and commission to intermediaries - These will be reimbursed by the government - Scheme restricted to resident Indian entities - The cap on bonds per annum no more than 500 grams per person - Rate of interest to be decided by government, based on market conditions - Bonds in dematerialised and paper form - Denominations of 5, 10, 50, 100 grams of gold - Price may be drawn from reference rate of the central bank towards the scheme - Notified agencies, like banks, post offices, and non-banking firms may collect/reem money - The tenor of the bonds for five-seven years - Bonds can also be used as collateral for loans - Bonds to be easily sold and traded on exchanges - Capital gains tax same as that for physical gold for individuals - Capital gains tax to adjust for inflation - Amount received can be used by government like borrowings - On maturity, redemption in rupee amounts alone - Interest rate to be calculated on value of gold at investment - Principal amount to be redeemed at the then price of gold - If price has since fallen, depositor can roll-over the bond for three or more years - Deposit will not be hedged and all risks will be borne by government - But position may be reviewed in case "Gold Reserve Fund" becomes unsustainable - Bonds to b sold by post offices, banks, non-banking firms, upon commission.