Gold monetization scheme: The Indian Government has closed the Gold Monetization Scheme (GMS) officially, targeting an end to a decade-long project designed to mobilize ceilings of dormant gold. The scheme was inaugurated in November 2015 and was meant to cut the gold imports and encourage investments in digital gold. But authorities have decided to close down the scheme because of changing market conditions and low public participation.
For banks, this does close the scheme for some time based on their commercial interests, but it opens up bigger questions for present-day investors. The gold is already deposited. Will investors get their gold back, and in what form?
Why Did the Gold Monetization Scheme Fail?
India’s deep-rooted emotional connection with gold has contributed significantly to the scheme’s failure. Jewelry is carved up to be deposited in a government-backed program, not within the purview of most households.
- Main Reasons for Low Adoption: Complex Procedure: Several sub-stages were involved for depositing gold along with purity testing, which was done only in limited centres.
- Tax and Disclosure Issues: Mandatory declarations and the possibility of tax liabilities made investors skeptical.
- Lack of Awareness: A significant portion of the Indian populace had not heard of the scheme’s benefits. Participation was, therefore, very low.
Even after the efforts put in place, only 5,693 individuals took part and deposited 31,164 kg of gold small drop in comparison to what might be estimated at around 30,000 tonnes of gold lying idle in Indian households.
What Next for GMS Investors?
The scheme is now closed, and the biggest question is a gold return. The government has not clarified on this process, but according to experts, they believe that banks will process withdrawal following the original terms.
Possible Scenarios for Investors:
- Direct Gold Return: The banks may return the same quantity of gold minus any dues.
- Cash Compensation: The current market value of the invested gold may be paid to the investors.
- Conversion to Sovereign Gold Bonds (SGBs): A seamless shift to SGBs could be an alternative, offering interest and tax benefits.
Until then, official guidelines are released; depositors should be contacting their respective banks with updates on the withdrawal process.