Government Clears Two Gold Schemes

  • The Union Cabinet approved two schemes — the Sovereign Gold Bond Scheme and the Gold Monetisation Scheme — that could bring an estimated 20,000 tonnes of idle gold lying with Indian consumers into the economy and also reduce India’s dependence on gold imports.
  • Through the Gold Monetisation Scheme, gold in any form can be deposited with banks for a period of one to 15 years. This gold will earn interest and redemption will be at the prevailing market value at the end of the tenure of deposit.
  • The Sovereign Gold Bond Scheme is aimed at customers looking to buy gold as an investment. Under the Scheme, “there will be no need to buy actual gold as customers can buy gold bonds which will be relatable to the weight of gold,” Finance Minister Arun Jaitley said while announcing the Union Cabinet’s decisions.
  • “The bonds will be issued in denominations of 5 grams, 10 grams, 50 grams and 100 grams for a term of five years to seven years with a rate of interest to be calculated on the value of the metal at the time of investment,” Mr. Jaitley told reporters at the press briefing.
  • “The Union Cabinet’s announcements reflect both a very practical approach and a long-term view of gold. The question is no longer whether the scheme will work, but how to make it attractive for customers. The scheme must be well marketed… to ensure that the households savings in gold can be tapped by the banking industry. This will pave the way for a more active and larger role for Indian banks in bullion,” said Somasundaram PR, Managing Director, India, World Gold Council.
  • However, Mr. Jaitley announced that there would be a cap of 500 grams that a person can purchase in a year. Such bonds would be offered to only Indian citizens and institutions.
  • While the gold deposited with banks under the monetisation scheme will be allowed to be sold to jewellers in order to boost domestic supply, Mr. Das emphasised that there would be no dilution of KYC (know your customer) norms.
  • “We do not want to allow the Gold Monetisation Scheme to become a vehicle for converting black money into white,” he said.

Dearness allowance

  • The Union Cabinet also approved an additional dearness allowance (DA) of six per cent for central government employees from July 1, which has now been raised to 119 per cent of basic pay as compared to 113 per cent earlier.
  • The Union Cabinet also permitted 100 per cent FDI under the automatic route for white label ATM operations.
  • “This decision will ease and expedite foreign investment inflows in the activity and thus give a fillip to the government’s effort to promote financial inclusion in the country, including the Pradhan Mantri Jan Dhan Yojna,” an official statement said.

 

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