Since time immemorial gold is considered to be a safe investment haven. Indians have been stacking the yellow metal to meet marriage needs, education needs and medical exigencies. A large part of purchase and exchange of gold has hitherto remained in the unorganized sector.
The Indian government has recently launched initiatives to lure the Indians to deposit their gold holdings in banks and thereby earn returns on their investments.
At the heart of the initiative is the objective to trim down imports of gold. The Gold Monetization Scheme, launched in November, 2015, has however received a lukewarm response. There are two possible reasons for this; one, people do not want to reveal their disproportionate assets and secondly the rate of return offered by government is not mouth watering.
The government has demonstrated its commitment to the scheme by offering 2.5 percent commission to participating banks. The intent of the regulators is to make the scheme attractive for banks also.
As per the current scheme, customers can deposit gold (bars, coins and even jewelry), earn interest for the period of deposit and take back their holdings are the expiry of the tenure. The customers have the option of depositing gold in the short-term bank deposit (STBD) scheme (period 1-3 years) or medium and long-term gold deposits (MLTGD) (period 5-7 years for medium term and 12-15 years for long term).
