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12 Things To Know Before You Free Up Idle Gold

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India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. Indians' penchant for gold spans centuries and is rooted in the Hindu religion, with the Diwali festival being one of the biggest annual buying seasons. Gold also forms part of dowries and it is an instrument of financial security for 70 per cent of India's rural population.
In a move to monetise some 20,000 tonnes of gold sitting idle inside vaults, the government has released a draft scheme that lets individuals and entities such as temple trusts to deposit the yellow metal and earn tax-free interest on the value of the gold.
Here's all you need to know about unlocking the value of gold
1) Gold monetisation scheme in nutshell 
The scheme is designed to help people and entities such as temple trusts to deposit the yellow metal and earn tax-free interest on the value of the gold.

 How it works
When a customer brings in gold to the counter of specified agency or bank, the purity of gold is determined and exact quantity of gold is credited in the metal account. Customers may be asked to complete KYC (know-your-customer) process. The deposited gold will be lent by banks to jewellers at an interest rate little higher than the interest paid to customer.

Against the Scheme 
Since such schemes attract interest rates of not more than half a per cent to 2 per cent, they are rarely popular in developing nations.
Individuals assign high intrinsic value to gold craftsmanship and heirlooms and are unwilling to melt down gold, especially if it has historic value
4) What does the depositor get
Will see his gold grow over time, that too tax free
No wealth, capital gains or income tax likely on gold deposited
5) Way to calculate rate 
Both principal and interest to be paid to the depositors of gold, will be ‘valued’ in gold. For instance, if a customer deposits 100 gm of gold and gets one per cent interest, then, on maturity he has a credit of 101 gram.
Banks will have the freedom to decide on the rate of interest they will offer

The tenure of gold deposits is likely to be for a minimum of one year. The minimum quantity of deposits is pegged at 30 gram to encourage even small deposits. The gold can be in any form, bullion or jewellery.
7)Past  imperfect
The Centre had launched a gold monetisation scheme in 1998-99 that proved unproductive as it required a minimum of 500 gm of gold to be deposited
Under that scheme, SBI offered 0.75 per cent to 1 per cent interest and only 15 tonnes of gold had been deposited till date
8) Use of deposits
The gold deposited will be used to buy foreign currencies or turned into coins for on sale by banks or lent to jewellers or else deposited with the RBI to meet cash reserve ratio and statutory liquidity requirements
9) Redemption plan 
Customer will have the choice to take cash or gold on redemption, but the preference has to be stated at the time of deposit.
10) Deposit details
After depositing the gold, the customer will be issued a certificate. Based on this certificate, the bank will open a gold savings account. Under the proposed scheme, the interest will be payable after 30/60 days of opening of the account.
The scheme will also allow jewellers to obtain loans in their metal account. It has proposed to allow banks to lend the gold they collect under this scheme to jewellers
11) What’s in it for banks
Banks will have another source of income and they can sell gold to raise forex for lending to traders

Banks can lend gold deposited to jewellers at higher rates 

12) What’s in it for economy
Unproductive gold will come out in open 
Need for gold imports will come down, conserving forex

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