Major relaxation in GMS as govt allows long term deposits to be redeemed in gold at maturity

In a major relaxation in gold deposit scheme, the Reserve Bank of India today allowed banks to redeem gold deposited under the scheme in form of gold when deposit is for medium or long term. This was a major demand from temple boards. So far the provision of redeeming gold deposits under the scheme in form of gold or returning gold on maturity was allowed only for short term deposits of short term of 1-3 years.

Temples were demanding option to ask for gold on maturity in medium and long term deposits also as returns there were 2.25 to 2.5 per cent compared to much lower returns in short term. So far medium and long term deposits have to be redeemed only in cash equivalent to price of gold at the time of maturity.

Today RBI amended gold monetisation scheme giving option of getting gold or cash at maturity. However when a depositor asks for gold at maturity in gold, "an administrative charge at a rate of 0.2% of the notional redemption amount in terms of INR shall be collected from the depositor. However, the interest accrued on MLTGD shall be calculated with reference to the value of gold in terms of Indian Rupees at the time of deposit and will be paid only in cash," said RBI.

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