By D K Aggarwal
Nov 7, 2015 , 10.34AM IST
Apart from physical gold, this Dhanteras -the gold and silver buying festival – one can also avail the benefit of investing into the recently-launched three gold-related schemes, including India gold coin bearing the Ashok Chakra (available in denominations of 5 gm and 10 gm), gold monetisation, and sovereign gold bond.
Importantly, instead of buying gold in physical form, investors can now park their money in bonds that are backed by gold. The idea behind launching gold monetisation schemes (GMS) is to tap household gold, which has been estimated to be of around 22,000 tonnes. Moreover, the recently-launched sovereign bond scheme would offer the same benefits as physical gold and can be used as collateral for loans and can also be traded on stock exchanges.
At the time of selling, customers can earn returns as per the current price of gold. This scheme would help shift part of the estimated 300 tonnes of physical gold, which is purchased every year (in the form of gold bars and coins) in the country for investment. At the same time, it will relieve investors of the need to check the quality of gold and with valuation. Gold monetisation would help individual to earn up to 2.50 per cent interest rate on their idle gold. Investors can invest for medium term (between 5 and 7 years) as well as long term (12-15 years tenure).
This initiative is likely to increase the productivity of the commercial banks as well as of the NBFCs. NBFCs are authorised to collect the application form and submit in banks and post offices.
It is expected that with the launch of these schemes, India would be able to check its current account deficit (CAD). Actually, Indians are obsessed with the physical gold and India has suppressed China in case of its appetite for it. To note, India’s current account deficit stood a record $190 billion in 2013.
This has prompted the then UPA government to hike import duty on it to a record 10 per cent. The efforts of government have helped India to import an estimated $34 billion of gold during the year 2014-15 much lesser then the previously imported.
To note, India is the world’s top gold consumer. It is in 10th position among the top 10 countries that hold the most gold in their central banks; the Reserve Bank of India holds 557.7 tonnes of the precious metal.
(The author is CMD, SMC Investments and Advisors. Views and recommendations expressed in this section are his own and do not represent those of EconomicTimes.com.)