GOld Monetisation

1. 4/11/2015

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 world’s gold is in India’s 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 India’s 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.