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.