The Indian households, traditionally, have been investing huge amount of funds in gold and gold jewellery.
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In an exclisive interview with Reema Sharma of Zee Media, Rajeev Kapoor, CEO Trustline, shares his views on Gold Monetisation Scheme and Gold Bond Scheme. So, rather than keeping all your gold idle in the bank locker and coughing up steep rentals, it makes sense to give it away to GMS.
You know, as per Hindu mythology Dhanteras is perceived as an auspicious day that brings good luck when you purchase gold silver or new utensils. These gold schemes offer interest besides earning you returns linked to gold prices. “Therefore, the yield calculated from the prevailing market price might turn out to be lower than 2.75 per cent, in the event gold prices have moved up”.
It is very hard to access whether the gold buyer has become immune to fluctuations in the yellow metal or not.
The sovereign gold bond, launched by Prime Minister Narendra Modi with much fanfare and being sold through banks and post offices, is being viewed by many as a damp squib that may not mop up much money for the government. How can people benefit from these schemes?
The Government has launched two wonderful schemes like Gold Monetization Scheme and Sovereign Gold Bond. The principal and interest of the deposit under the scheme will be denominated in gold. However, experts and sector players believe, to attract retail investors or depositers into these, the government and especially banks will have to aggressively back the schemes. Initially the coins will be available in denominations of 5 and 10 grams.
You will be paid an annual interest of 2.25 per cent and 2.5 per cent for a tenure of five to seven years and 12-15 years, respectively. The deposit certificates will be issued by banks in equivalence of 995 fineness of gold. The short term deposits of gold will be accepted by banks on their own account, while the medium and long term deposits will be on behalf of government. Price of bond will be simple average price of previous week (Monday – Friday) of GOLD 999 purity published by the India Bullion and Jewellers Association Ltd which will also be published on RBI website two days before the issue opens. Moreover, SGB can be collateralized for loans and other purposes. So, like any other bank deposit, this scheme will also have a KYC requirement and you will need to provide PAN details. Do you think people will let go of their sentimental value related to the yellow metal? Why should they invest in SGB? These gold bonds are interest bearing and will be payable in terms of grams of gold.
Issues: It will be interesting to see how the government prices these.
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“The bigger issue is that while on one hand we were complaining of CAD affecting gold imports we are here going to increase gold imports in a way as we are promoting the sales of gold bars and coins which was frowned upon”, he added. The idea behind launching gold monetisation schemes (GMS) is to tap household gold, which has been estimated to be of around 22,000 tonnes. It is expected that with the launch of these schemes, India would be able to check its current account deficit (CAD).
