Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

GOLD DEPOSIT SCHEME
The Gold Deposit Scheme was launched in 1999. It is supervised by the Reserve Bank of India (RBI).
The scheme’s declared objectives are to reduce the import of gold, bring privately-held gold into circulation, and
provide the public with an opportunity to earn income on their gold holdings.
The scheme is available to Resident Indians: individuals, Hindu Undivided Families (HUF), trusts and companies.
The minimum deposit is normally 200 g. Deposits are lodged over 3 - 7 years. Annual interest payments are around
3 - 4%.
Apart from earning interest on deposited gold, depositors are offered other incentives. Interest earned from the deposit
is exempt from income tax. Any increase in the value of the deposit is exempt from capital gains tax. Its value is also
not taken into account when calculating the annual wealth tax.
The scheme is offered by 4 banks through 134 branches in 55 cities. In its first two years, around 8 tonnes of old
jewellery, bars and coins were deposited. The State Bank of India accounted for 90%.
BANK PROGRAMMES
The RBI has authorised 6 scheduled commercial banks to offer the scheme. The 4 marked with an asterisk
were active in 2001.
Bank Authorisation date
State Bank of India * 1999 August
Indian Overseas Bank * 1999 November
Corporation Bank * 1999 December
Allahabad Bank * 2000 January
Canara Bank 2000 March
Bank of Nova Scotia 2000 August
Source: Reserve Bank of India
Although authorised banks are responsible for their own individual programmes, RBI guidelines have established common
features.
The term of a deposit ranges between 3 - 7 years, although a premature withdrawal after the lock-in period is permitted.
Bars, coins and jewellery are accepted as scrap for assaying and refining. After the preliminary assay, but before the final
assay, the depositor has a right to withdraw.
Within 90 days of the receipt of the deposit, the bank is obliged to issue a passbook or certificate/bond that records the
name of the depositor, the amount of gold deposited in grammes, the date of deposit, the date of maturity, and the
interest payable.
Interest on the value of the deposited gold can be paid at fixed intervals or at maturity. At redemption, payment can be
made in gold bars (995 purity) or in rupees.
4 banks have launched their programmes, with The Bank of Nova Scotia planning to do so.
Annual interest payments are dependent on the term of the deposit. For example, one bank offers progressively higher
rates, from 3% (3 years) up to 4% (7 years).
To cover costs and fund the interest payment, banks loan the deposited gold (after refining) to jewellery fabricators. They
are also permitted to enter into forward contracts with overseas exchanges and international bullion dealers, but limited to
the amount of gold received under the scheme. They are also allowed to sell the deposited gold domestically, as well as
give rupee loans against the deposited gold as collateral.
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AN INTRODUCTION TO THE INDIAN GOLD MARKET