The Reserve Bank of India (RBI) late on Wednesday liberalised the gold-monetisation scheme (GMS), allowing charitable institutions, the Centre, states, and government entities to deposit the precious metal.
Experts said this was likely to attract huge quantities of gold over the coming months. Some claimed this was a move to bring out unaccounted gold ahead of the Lok Sabha elections, slated in April-May.
Individuals, corporate entities, mutual funds, and exchange-traded funds were already allowed to deposit gold under the scheme launched by Prime Minister Narendra Modi on November 5, 2015. The aim of the scheme was to mobilise idle gold lying with households and temples into the system, and consequently, reduce imports.
Sources in the sector said allowing government agencies to deposit gold will allow agencies to deposit what they had confiscated.
Surendra Mehta, national secretary, Indian Bullion and Jewellers Association, said, “The new changes will allow the government to deposit gold confiscated by various agencies. This will indirectly raise the gold holding under the scheme.”
Experts said allowing charitable institutions to take advantage of the GMS was also a good idea. This would allow those holding unaccounted gold to deposit it, without disclosing their identity.
A sector expert, who did not want to be named, said, “In the past, several complaints were received by the government about money laundering by charitable trusts. These used to accept money eligible for donation tax benefit and give cash back to the donor.”
The government has now imposed a 30 per cent tax on charitable trusts for donations received from unidentified persons to prevent money laundering. “Now, donors will deposit unaccounted gold and get cash after a deduction of 30 per cent from these trusts. But, this means the unaccounted gold will also find its way into the scheme,” he said.
Sources also said money collected by depositors like this could also be used to fund election campaigns.
Under the scheme, a depositor gets 2.25 per cent interest annually for a short-term deposit of one year to three years. Medium- and long-term deposits get 2.5 per cent interest rate.
A depositor has to give gold to a collection centre, which are also hallmarking centres. These issue certificates of purity after melting the gold, which is sent to refineries for converting into bars. Banks issue deposit receipts after collecting purity certificates from depositors.
Story so far
- RBI relaxed GMS to allow govt agencies, charitable trusts to deposit gold
- Experts believe this will attract confiscated gold
- In last two months, several rounds of meeting with finance ministry and stakeholders took place
- Banks have been asked to aggressively push the scheme
- Response was poor as hardly 15 tonnes of gold was deposited in last three years
- Some temples deposited gold, many were waiting
- MMTC auctioned 13 tonnes of gold mobilised under the scheme in accordance with the decided norms
- 25,000 tonnes of gold is estimated to be lying idle with Indian households