Gold-Monetization-Scheme YouTube Lecture Handouts

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Gold Monetization Scheme & Sovereign Gold Bond Scheme (4 Tranches) - IAS GS 2016

Gold Monetization Scheme & Sovereign Gold Bonds

β€œAll That Glitters is Not GOLD” if Kept IDLE

Global Scenario - Bullish GOLD

  • Current stock market recovery in the U. S. may be nearing its peak
  • Change in US presidency - threat to global financial stability - time to buy gold
  • When demand for dollars falls, investors park their money in gold & increase value
  • Fears of a collapse in the Eurozone, even after Greece brokered debt deal in May
  • Possible Impact of Brexit on the wider European economy
  • Market uncertainty and expansionary monetary policies
  • Concerns over negative interest rate policies by central banks in Europe and Japan
  • Demand for gold typically climbs when interest rates are low
  • Risk of collapse of large global banks and geo political risks
  • Gold mine supply peaked in 2016 but might enter decline in 2017 and 2018

Need for GMS

Need for GMS Image-1
Need for GMS Image-2

Idea Behind GMS

Short Term – 1 - 3 Years (By individual banks)

Middle Term – 5 - 7 Years (By Banks on Behalf of GoI – notified by RBI)

Long Term – 12 - 15 Years (By Banks on Behalf of GoI – notified by RBI)

Aims and Objectives of GMS

  • Mobilize gold held by household & institutions
  • Reduce gold import and meet Current Account Deficit
  • Gold to be available as raw material on loan from the banks
  • Improve market liquidity
  • Convert gold into a performing asset
Aims and Objectives of GMS Image

Benefits of GMS

  • Benefit to Customers
  • Benefit to Government
  • Tax Benefits

Disadvantages of GMS

Challenges Faced by GMS

Sovereign Gold Bonds

Price of bond will be fixed in Indian Rupees based on previous week՚s (Monday – Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA) . The issue price will be disseminated by RBI.

Price will be published on RBI website 2 days before scheme opens

Interest on the Bonds will be taxable as per Income-tax Act, 1961 (43 of 1961) . Capital gains tax treatment will be the same as that for physical gold.

✍ Manishika