Monday, October 26, 2015
Gold Monetisation Scheme, 2015
GMS, modifies the existing ‘Gold Deposit Scheme’ (GDS) and ‘Gold Metal Loan Scheme (GML). This will mobilise gold held by households and institutions in order to facilitate its use for productive purposes and to reduce reliance on the import of gold.
Revamped Gold Deposit Scheme (R-GDS)
i. Deposits outstanding under the earlier Gold Deposit Scheme will be allowed to run till maturity.
ii. All designated banks will be eligible to implement the scheme.
iii. The principal and interest of the deposit under the scheme shall be denominated in gold.
iv. Persons eligible to make a deposit - Resident Indians (Individuals, HUFs, Trusts including Mutual Funds/ ETFs). Deposits in joint names are allowed. The existing rules of bank deposit accounts will be applicable.
v. All deposits shall be made at the CPTC or designated branches at the discretion of the Bank.
vi. Interest will start accruing from the date of conversion of gold into tradable gold bars or 30 days after the receipt of gold at the CPTC or the bank, whichever is earlier.
vii. Gold accepted by CPTC or bank shall be treated as an item in safe custody held by the designated bank.
viii. On the day the gold deposited, starts accruing interest, the designated banks shall translate the gold liabilities and assets in Indian Rupees by crossing the London AM fixing for Gold / USD rate with the Rupee-US Dollar reference rate announced by RBI on that day. The custom duty for import of gold will be added to arrive at the final value of gold. This approach will also be followed for valuation of gold at any subsequent dates and for the conversion of gold into Indian Rupees under the Scheme.
ix. Reporting – The designated banks need to submit a monthly report on GMS to the RBI .
Acceptance of deposits
i. The minimum deposit at any one time shall be raw gold equivalent to 30 grams of gold. There is no maximum limit.
ii. All gold deposits shall be assayed at CPTC:
Types of deposits
Short Term Bank Deposit (STBD)
i. The deposit will be for a period of 1-3 years and will be treated as their on-balance sheet liability.
ii. The deposit will attract CRR and SLR from the date of credit. However, the stock of gold held by banks will be an eligible asset for meeting the SLR requirement.
iii. Banks may allow whole or part premature withdrawal subject to minimum lock-in period and penalties, as determined by them.
iv. Banks are free to fix the interest rates which shall be credited in the deposit accounts on the due dates. This can be withdrawn periodically or at maturity.
v. Redemption on maturity will be either in Indian Rupee or in gold at the option of the depositor. The option in this regard shall be made at the time of making the deposit and shall be irrevocable.
vi. Premature redemption shall be in Indian Rupee equivalent or gold at the discretion of the designated bank.
Medium and Long Term Government Deposit (MLTGD)
i. The deposit will be accepted on behalf of the Central Government.
ii. This deposit will not be reflected in the balance sheet of the banks. It will be the liability of Central Government.
iii. The deposit can be made for a period of 5-7 years (Medium Term) or 12-15 years (Long Term) or for such period as may be decided by the Central Government. The banks may allow whole or part premature withdrawal subject to minimum lock-in period and penalties as determined by the Central Government. Rate of interest on Medium Term deposits shall be 2.25% and that for Long Term shall be 2.5%.
iv. Redemption including interest accrued will be only in Indian Rupee equivalent of the value of the gold and accumulated interest as per the price of gold prevailing at the time of redemption.
v. The gold received under MLTGD will be auctioned and the proceeds will be credited to Government’s account with RBI.
vi. RBI will maintain the Gold Deposit Accounts denominated in gold in the name of the banks that will in turn hold sub-accounts of individual depositors.
Opening of gold deposit accounts
The rules regarding opening of gold deposit accounts shall be same as applicable to any other deposit account of the bank. Those who do not have an account, shall open a gold deposit account with zero balance before tendering gold at the CPTC.
The banks will credit the STBD or MLTGD with the amount of 995 fineness gold as indicated in the advice received from CPTC, after 30 days of receipt of gold at the CPTC.
Collection and Purity Testing Centres
i. The Central Government will notify a list of BIS certified CPTCs under the Scheme.
ii. The banks will be free to select and authorize the CPTCs out of the list notified by the Central Government .
iii. Each bank authorizing a CPTC to collect deposit of gold on its behalf shall ensure that its name is included in the list of such banks displayed by the CPTC.
iv. The schedule of fees charged by the CPTCs shall be displayed at a prominent place at the centre.
v. Before tendering the raw gold to a CPTC, the depositor shall indicate the name of the bank with whom he would like to place the deposit1.
vi. After assaying the gold, the CPTC will issue a receipt showing the standard gold of 995 fineness on behalf of the bank indicated by the depositor. Simultaneously, the CPTC will also send an advice to the bank regarding the acceptance of deposit.
vii. The 995 fineness equivalent amount of gold will be final and any difference in quantity or quality found after issuance of the receipt shall be settled among the CPTC, the refiner and the bank in accordance with the terms of the tripartite agreement.
viii. The depositor shall produce the receipt issued by the CPTC to the bank branch, either in person or through post.
ix. On submission of the deposit receipt, the bank shall issue the final deposit certificate on the same day or 30 days after the date of the tendering of gold at the CPTC, whichever is later.
Transfer of gold to the Refiners
i. The banks will be free to select the refiners.
ii. The CPTCs will transfer the gold to the refiners as per the terms and conditions set out in the tripartite agreement.
iii. The bank may decide to keep the refined gold either in the vaults maintained by the refiners or at the branch itself.
iv. The banks will pay a fee to the refiner for his services as decided mutually.
v. The refiners shall not collect any charge from the depositor.
Tripartite agreement between the designated banks, refiners and CPTCs
i. Every bank shall enter into a legally binding tripartite agreement with the refiners and CPTCs .
ii. The agreement shall clearly lay down the details regarding payment of fees, services to be provided, standards of service, the details of the arrangement regarding movement of gold and rights and obligations of all the three parties in connection with the operation of the Scheme.
Utilization of gold mobilized under GMS
Gold accepted under STBD
i. sell the gold to MMTC for minting India Gold Coins (IGC), to jewellers and to other banks participating in GMS; or
ii. lend the gold under the GML scheme to MMTC for minting India Gold Coins (IGC) and to jewellers.
Gold accepted under MLTGD
i. Auctioned by MMTC or any other authorized agency and sale proceeds credited to the Central Government’s account with RBI.
ii. The entities participating in the auction may include RBI, MMTC, banks and any other notified entities.
iii. Gold purchased by a bank may be utilized for any purposes indicated above.
i. Banks are allowed to access the International Exchanges, London Bullion Market Association or make use of Over-the-counter contracts to hedge exposures to bullion prices subject to the RBI guidelines.
ii. The banks should put in place suitable risk management mechanisms to manage the risk arising from gold price movements.
Oversight over the CPTCs and Refineries
i. The Central Government, in consultation with BIS, NABL, RBI and IBA, may put in place appropriate supervisory mechanism over the CPTCs and the refiners.
ii. The Central Government may take appropriate action including levy of penalties against the non-compliant CPTCs and refiners.
iii. The Central Government may also put in place appropriate grievance redress mechanism regarding any complaints against the CPTCs.
iv. The complaints against the banks will be handled first by the bank’s grievance redress process and then by the Banking Ombudsman of RBI.
GMS - linked Gold Metal Loan (GML) Scheme
i. The gold mobilized under STBD may be provided to the jewellers as GML. The banks can also purchase the gold auctioned under MLTGD and extend GML to the jewellers.
ii. The jewellers will receive the physical delivery of gold either from the refiners or from the bank.
iii. The existing Gold (Metal) Loan (GML) Scheme operated by nominated banks will continue in parallel with GMS-linked GML scheme. All prudential guidelines for the existing GML Scheme will also be applicable to the new Scheme.
iv. The banks other than the nominated banks shall be eligible to import gold only for redemption of the gold deposits mobilised under the STBD.
Interest to be charged
The designated banks are free to determine the interest rate to be charged on GMS-linked GML.
The tenor of GMS-linked GML will be the same as under the extant GML scheme
______________________________________________________________________________Based on RBI Circular dt 22/10/15. Amended up to 3/11/15. Please visit www.rbi.org.in for any further clarification if required…..Poppy