It is a gold savings account which will earn interest for the gold that you deposit in it. Your gold can be deposited in any physical form – jewellery, coins or bars. This gold will then earn interest based on gold weight and also the appreciation of the metal value. Let us first understand how the gold monetisation scheme will work? It is important to check your gold’s purity and now it is possible to be done through hallmarking centres. You can take your gold in any form to the hallmarking centre and they will assess the gold in front of you to provide you with a certificate on purity and gold content. This certificate can be deposited by you in the bank to open your Gold savings account. There will be Know Your Customer (KYC) formalities to open the account in the bank. On the deposited gold, bank will offer to pay you annual interest. You have to choose the cash/gold redemption option and tenure of your choice at the time of deposit itself.

You can actually collect interest on your gold value. On completion of gold monetisation scheme tenure the bank will give 2% of interest calculated on the weight of your gold. For instance, if you deposit 100 gms of gold, at the end of the first year you can collect 102 gms of gold. Let us also look at the tenure and minimum value. The minimum lock-in period for your gold is one year and you can deposit as little as 30g to open a gold savings account. Why is gold monetisation scheme a good investment option? There are many positives to depositing under the Gold monetisation scheme. For example, the gold monetisation scheme earns interest for your gold jewellery lying in your locker. Broken jewellery or jewellery that you don’t want to wear can earn interest for you in gold. Coins and bars can earn interest apart from the appreciation of value. Your gold will be securely maintained by the bank. Redemption is possible in physical gold or rupees hence giving your gold purchase further earning opportunity. Earnings from Gold monetisation scheme are exempt from capital gains tax, wealth tax and income tax. There will be no capital gains tax on the appreciation in the value of gold deposited, or on the interest you make from it. How to redeem gold after scheme tenure is over? At the end of the tenure, you can choose to take physical possession of the gold or opt for rupees for the amount of gold on that day’s price. Either way, you have to specify your preference in the beginning right at the time of opting for the GMS.

What is the big story behind the GMS and why has it not taken off in a big way? First let us look at the story. Gold lying in the locker appreciates in value if gold price goes up but it doesn’t pay you a regular interest or dividend. On the contrary, you incur carrying costs on it (bank locker charges). The gold monetisation scheme will allow you to earn some regular interest on your gold and save you carrying costs as well. Then why has not taken off? The reason is that Indians are still sentimentally attached to gold and prefer to pledge the gold with a bank and take gold loans for liquidity rather than opting for the GMS. That is one the key reasons why it has not really taken off in India.