The government is reconsidering its Gold Monetisation Scheme (GMS) as its “costs outweigh benefits”, The Print has reported.
The scheme, launched in 2015, allows people to deposit idle gold with a Reserve Bank of India (RBI)-designated bank and earn interest on it.
This works similar to a bank fixed deposit. One can earn up to 2.5 per cent interest depending on the tenure chosen.
Moreover, the interest earned on the gold deposits is exempt from capital gains tax, wealth tax and income tax.
The idea behind introducing the scheme, among others, was to wean away investors from buying physical gold, and invest in paper gold, as high gold imports put pressure on the current account deficit.
India’s current account deficit in April-September of financial year 2021-22 stood at 0.2 per cent of GDP, as against a surplus of 3 per cent in the year-ago period on the back of a sharp increase in the trade deficit.
The report quoted a senior government official, saying the Department of Economic Affairs in the Ministry of Finance has been in talks with the RBI on the matter and has asked RBI to conduct a structural review of the scheme as the “costs associated with the scheme are proving to be higher than anticipated.”
“It is not so viable for the government due to inflation in the gold price,” the official said.
However, the scheme did not find many takers -one of the main reasons being what happens to the gold you deposit with the bank.
As per the scheme rules, the gold – jewellery, bullion, artefacts – is required to be deposited with the bank and in turn, the bank will test its purity. Once the purity of the gold jewellery is ascertained, they will melt the gold jewellery and convert it into bullion or gold coins.