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G old monetisation

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Shrikant Jadhav

This document discusses gold monetization schemes in India. It explains that monetization refers to converting an object like gold into money that can be used for exchange. It notes that India possesses around 10% of the world's gold, much of which is held privately rather than being traded or monetized. The gold monetization scheme allows individuals to deposit their gold in a bank vault and earn interest on it while freeing up liquidity for banks to use. The goal is to mobilize India's large private gold stocks to reduce imports and the current account deficit.

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Monetisation refers to the conversion of an object into money, which means that it is generally accepted as a medium of exchange e.g. - Metals are monetized as coins once they are standardised in weight and accepted as money
Possession of gold has been a symbol of prosperity in India and is considered a safest form of investment that provides hedge against inflation. Jewellery are generally gifted on marriages and passed onto next generations. According to an estimate of World Gold Council, about 10 per cent of worlds gold is in Indias possession. Gold is having a liquidity factor and a good value may be derived by selling it at anywhere any time. Some independent estimates indicate that rural India accounts for about 65 per cent of total gold stock in the country. The jewellery bought in times of prosperity has been pawned or sold for cash in periods of distress or need.
What is it? How it Works? if you are having gold in your savings & it is just lying in bank lockers then it is the time to deposit the same in your metal account. Once you deposit the same in your metal account, you will start earning interest on the same. When a customer bring in his gold to the counter of specified agency or bank, the purity of gold is verified. The verified purity defines the exact quantity to be credited in the metal account. While depositing, customer may be asked to complete KYC process. Generally period of deposit is expected to be 1 to 7 years.
Despite introduction of variety of measures to reduce the CAD (higher import duties, 80:20 quota for imports, restrictions on gold related lending & coin sales) India still reported 3rd highest demand for gn old i2013 at 25.2% of world demand. In Q2 of 2014 India reports the highest demand for gold in the world (26%) as China has reduced its demand . China India
Gold Monetising Scheme (GMS): Purpose To reduce demand of overseas gold. To curb Current Account Deficit (CAD). To mobilize existing gold stocks in the country to meet a prospective demand. Over 22,000 tonnes of gold are said to be lying idle with Indian households (mainly rural), which are neither traded nor monetised to liquidate domestic gold stock & convert non-productive asset to a productive one. To overcome drawbacks of existing Gold Deposits & Gold Loan Schemes.
G old monetisation
Advantages Disadvantages The gold kept in the lockers may earn you an additional income per annum. The regular income can be converted into money, may be invested in recurring deposit or pension scheme. Gold will be in safe keeping without your having to cough up locker charges. Banks can lend this gold to jewellers or deposit it with the Reserve Bank of India, that will free rupee liquidity which in turn will have an impact on the earnings. Banks can keep the gold as their portion of the statutory reserves, as required by Indias apex bank You will have the gold in your metal account but not in the same form like jewellery. Their may be some costs associated in melting gold and recasting the same as jewellery once you withdraw from your metal account. The centres and banks for depositing gold in this scheme may be not adequate and a person may have to travel distance for opting the scheme. Banks lacked capabilities, such as Valuation, Storage & Distribution, that are crucial for mobilizing gold for productive purpose.
G old monetisation

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G old monetisation

  • 2. Monetisation refers to the conversion of an object into money, which means that it is generally accepted as a medium of exchange e.g. - Metals are monetized as coins once they are standardised in weight and accepted as money
  • 3. Possession of gold has been a symbol of prosperity in India and is considered a safest form of investment that provides hedge against inflation. Jewellery are generally gifted on marriages and passed onto next generations. According to an estimate of World Gold Council, about 10 per cent of worlds gold is in Indias possession. Gold is having a liquidity factor and a good value may be derived by selling it at anywhere any time. Some independent estimates indicate that rural India accounts for about 65 per cent of total gold stock in the country. The jewellery bought in times of prosperity has been pawned or sold for cash in periods of distress or need.
  • 4. What is it? How it Works? if you are having gold in your savings & it is just lying in bank lockers then it is the time to deposit the same in your metal account. Once you deposit the same in your metal account, you will start earning interest on the same. When a customer bring in his gold to the counter of specified agency or bank, the purity of gold is verified. The verified purity defines the exact quantity to be credited in the metal account. While depositing, customer may be asked to complete KYC process. Generally period of deposit is expected to be 1 to 7 years.
  • 5. Despite introduction of variety of measures to reduce the CAD (higher import duties, 80:20 quota for imports, restrictions on gold related lending & coin sales) India still reported 3rd highest demand for gn old i2013 at 25.2% of world demand. In Q2 of 2014 India reports the highest demand for gold in the world (26%) as China has reduced its demand . China India
  • 6. Gold Monetising Scheme (GMS): Purpose To reduce demand of overseas gold. To curb Current Account Deficit (CAD). To mobilize existing gold stocks in the country to meet a prospective demand. Over 22,000 tonnes of gold are said to be lying idle with Indian households (mainly rural), which are neither traded nor monetised to liquidate domestic gold stock & convert non-productive asset to a productive one. To overcome drawbacks of existing Gold Deposits & Gold Loan Schemes.
  • 8. Advantages Disadvantages The gold kept in the lockers may earn you an additional income per annum. The regular income can be converted into money, may be invested in recurring deposit or pension scheme. Gold will be in safe keeping without your having to cough up locker charges. Banks can lend this gold to jewellers or deposit it with the Reserve Bank of India, that will free rupee liquidity which in turn will have an impact on the earnings. Banks can keep the gold as their portion of the statutory reserves, as required by Indias apex bank You will have the gold in your metal account but not in the same form like jewellery. Their may be some costs associated in melting gold and recasting the same as jewellery once you withdraw from your metal account. The centres and banks for depositing gold in this scheme may be not adequate and a person may have to travel distance for opting the scheme. Banks lacked capabilities, such as Valuation, Storage & Distribution, that are crucial for mobilizing gold for productive purpose.