The gold deposit scheme (GDS), also known as gold scheme or gold savings scheme, provides an avenue for investors to deposit their gold with a jeweller or a bank while allowing them to accrue returns in the form of an increased quantity of the precious metal.
These returns can be received either as a lump sum at the end of the year, or as monthly payments of a predetermined amount, which can be redeemed in either cash or gold. The primary objectives of gold schemes are to reduce dependence on imported gold, maintain stable foreign exchange, and mobilise gold resources.
Various banks and jewellers offer gold schemes with diverse features and benefits.
The GDS is open to any resident Indian, including individuals (single or joint), Hindu Undivided Families (HUFs), trusts, and companies.
The inception of gold schemes after Budget 2015 aimed to incentivise Indian citizens to deposit their unused gold in banks and receive returns upon maturity. Banks, in turn, can lend this gold to jewelers or utilize it for various purposes. Depositors are required to pay interest to the bank for the secure storage of their gold deposits, which can then be made available to jewellers. The overarching goal is to reduce reliance on foreign gold reserves and stabilise the country's foreign exchange.
Prime Minister Narendra Modi had introduced three new gold schemes: the Gold Monetisation Scheme (GMS), the Sovereign Gold Bond (SGB), and the Gold Coin and Bullion Scheme. Individuals or organisations can invest in these schemes, with a minimum requirement of one unit or one gram of gold, and the tenure typically spans eight years.
Positioned as a replacement for the existing GDS of 1999, GMS allows gold deposits at authorised collection and purity testing centres endorsed by the Bureau of Indian Standards. The principal and accrued interest are denominated in gold, with tenures ranging from one to three years for short-term, five to seven years for medium-term, and 12 to 15 years for long-term deposits. The scheme imposes a minimum lock-in period and penalties, as determined by the bank, for premature withdrawals.
Under this scheme, the Reserve Bank of India (RBI) issues gold bonds on behalf of the Government of India. These bonds are measured in multiples of gold grams, with a minimum limit of one gram. Individuals can purchase a minimum of one gram and up to 4 kg of gold bonds. The maximum tenure for investing in these bonds is eight years, but offers flexibility for exit starting from the fifth year.
This initiative by the Government of India involves issuing gold coins in denominations of five grams, 10 grams, and 20 grams.
Here are the features and benefits of the gold deposit scheme.
The minimum deposit quantity is 500 grams, with no upper limit.
Deposit periods are available for three, four, and five years.
Gold, in the form of bars, coins, or scrap jewellery, can be deposited.
Upon melting, assaying, and minting at the India Government Mint, a Gold Deposit Certificate will be issued by the nodal branch.
The certificate represents the pure gold content.
A maximum of five certificates can be issued for a single deposit.
The Gold Deposit Certificate will be dispatched to the depositor within 90 days of the gold deposit.
A nomination facility is available for individual deposits in a single name.
The scheme allows for transfer by endorsement and delivery, with the transfer noted at the nodal branch.
Upon maturity, the principal can be repaid in gold or equivalent rupees based on the maturity date's value.
Premature payment is permissible after a one-year lock-in period, but a penalty is applied to the interest rate.
The scheme can be renewed at any time after maturity for a future date.
Loan facilities are available at any State Bank of India (SBI) branch, allowing a loan of up to 75 per cent of the notional value of gold.
The scheme offers tax benefits, qualifying for exemption from income tax, wealth tax, and capital gains tax.