The Reserve Bank of India (RBI) announced details of the gold monetisation scheme last week and we explain here all that you need to know in 5 quick points. Check them out:
1. There are two gold monetisation schemes at work. In one, people take their physical stocks to a bank and get an interest on this for short-term and long-term schemes. The scheme is available for both jewellery as well as biscuits/bars.
2. The second part of the gold monetisation scheme involves non-physical gold, but the details of that are yet to be announced. The way the scheme is to work, if a person wants to buy Rs 1,00,000 of gold, he goes to a bank and gets a piece of paper acknowledging the bank/government owes him 37 grams of gold; an interest is paid on this and, at the time of maturity, the individual gets back the gold (plus the interest that accrues of this) either in physical form or as cash.
3. Both the gold monetisation schemes are desirable since people will get some returns on their gold - in the non-physical gold bond, there is an added advantage since the country doesn't import gold either.
4. There are some issues, however, with the gold monetisation schemes that still need clearing up. Know-Your-Customer (KYC) will be one and, while it is true there are KYC requirements even for buying physical gold, these are relatively less stringent.
5. The bigger problem with the gold monetisation schemes will be of the lack of liquidity. Right now, RBI is talking of short-term deposits of 1-3 years and longer-term deposits of 5-7 or 12-15 years. Theoretically, this gives investors a large range to choose from. But the key to all investments is liquidity, and that is something that goes away once an investor is locked into any tenure.
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