Government adds shine to gold deposit plan

NEW DELHI: A damaged bangle or your broken chain lying in a bank locker may help you earn 2-3 per cent interest under the proposed Gold Monetization Scheme ( GMS) that is being finalized by the government. The scheme will be a major improvement over 1 per cent interest being paid for deposits up to five years.

Sources said the government is also looking at the possibility of reducing the minimum deposit amount from 500 grams to around 50 grams to enable those having gold to actually make use of the scheme as the current floor is seen to be very high. "Given the attachment of people with gold, which is often passed down the generations, it is unlikely that someone will deposit bangles or heavy jewellery. It is largely things that are lighter in weight or damaged that will initially come," said a source.

Besides, the government is studying the possibility of reducing the minimum deposit period from the current three years as there is a perception that individuals would want to test the scheme by depositing the precious metal for a shorter duration.

Finance minister Arun Jaitley had announced the GMS in the budget to allow depositors of gold to earn interest in their metal accounts and at the same time help jewellers get loans in their metal accounts with banks and other dealers operating as intermediaries. The scheme is seen as a key element in the attempt to reduce gold import, a key pressure point on India's import bill.

When the gold deposit scheme was launched in 1999, the target was to mop up around 100 tonnes but the goal is yet to be achieved despite the plan undergoing changes, resulting in a marginal increase in rates on offer.

The new plan may involve greater participation from the private sector with the government likely to encourage more banks to participate.

Those opting for the scheme can take their gold to a purity verification centre, which will then issue a certificate that banks would accept. The banks will then open a metal account for someone depositing gold, while the gold will be sent for melting.