The Gold Monetization Scheme (GMS) was introduced by the Honourable Prime Minster in 2015 to turn gold holdings into an earning asset by allowing residents to deposit physical gold-bars, coins or jewellery-into a Gold Savings Account. – The idea being to mobilize domestic gold to be channelized for productive use in the system.
However, the total deposits accumulated by the banks under the GMS are 11.1 tonnes, which is a meagre number as compared to the estimated holdings of 23,000-24000 tonnes. Also, making the GMS more effective is important to address the widening current account deficit (CAD) issue.
In such a scenario, it becomes imperative to understand the reason for the non-participation in the GMS. GJC, being a responsible trade body would like to emphasize upon the point that Government must clearly give exemptions to households for minimum 500 grams of gold deposited, being of ancestral nature, from questioning by any tax department.
The same will make GMS more effective and benefit the government and participants at large. There are many other suggestions to make GMS successful at the ground level like, 1. Allow flexibility of GMS tenure for Banks, 2. Allow banks to give Gold Loans from the Long Term deposits mobilized under GMS by them since Interest given to customers under Short Term Loan is very less. 3. Reduce physical movement of gold before issuing Deposit receipts.