Sitting on idle gold? Government may soon give you a reason to earn from it
If you have gold jewellery or coins lying idle at home, the government may soon give you a new reason to put them to work
If you have gold jewellery or coins lying idle at home, the government may soon give you a new reason to put them to work instead of keeping them locked away. The Centre is likely to announce a revamped Gold Monetisation Scheme (GMS) within the next two weeks, reported Moneycontrol. One of the biggest proposed changes is that jewellers, and not just banks, could be allowed to collect gold deposits from households. Read Full Story The move aims to unlock thousands of tonnes of gold lying idle in Indian homes while reducing the country's dependence on gold imports. WHAT IS THE GOLD MONETISATION SCHEME? Launched in 2015, the Gold Monetisation Scheme was designed to encourage people to deposit their unused gold with banks instead of storing it at home. The deposited gold is tested, melted and converted into gold bars. In return, the depositor earns interest on the gold while retaining its value.
When the deposit matures, investors can receive either physical gold or its equivalent value in cash, depending on the type of deposit. The idea was simple: instead of importing more gold every year, India could use the enormous quantity of gold already sitting inside households. WHY IS THE GOVERNMENT REVAMPING IT? The original scheme never really took off. According to Moneycontrol, although India is estimated to hold around 25,000 tonnes of gold, only about 38 tonnes had been monetised even after nearly a decade. One of the biggest reasons was that only banks could accept deposits. The proposed overhaul could allow jewellers across the country to act as "collection partners", making it easier for households to participate. Industry bodies believe that if even 5% of household gold is brought into the formal system, it could unlock nearly $90 billion worth of liquidity for the economy. WHY DID THE OLD SCHEME FAIL?
The Gold Monetisation Scheme looked attractive on paper but struggled in practice. Many families were reluctant to part with jewellery that had sentimental or religious value because the gold had to be melted before it could be deposited. There were also concerns about paperwork and possible tax scrutiny on old family gold. For banks, the scheme offered little commercial incentive, while the government had to bear the cost of paying interest as well as the increase in gold prices, making the scheme expensive to run. WHAT COULD CHANGE THIS TIME? The biggest proposed change is convenience. Instead of approaching a bank, people may be able to deposit their gold through jewellers, who already have trusted relationships with customers. A wider network of collection centres could make the scheme more accessible and improve participation. The revamp also comes shortly after Prime Minister Narendra Modi urged citizens to defer gold purchases for a year as India looks to reduce pressure on imports.
The BriefWire