Gold schemes- Views of Geofin Comtrade Ltd
View on Gold schemes: Mr. C P Krishnan, Whole
time Director, Geofin Comtrade Ltd. on the Gold schemes launched today by the
Indian Government.
The recently launched schemes on gold are
primarily intended to reduce our reliance on import and manage the widening
current account deficit. In the Gold monetization scheme, even though the
interest part and tax benefits are the attracting points, overcoming the
sentimental approach of the public towards their gold belongings is the key
factor that determines the success of the scheme.
In case of sovereign bonds, option to invest in
demat form possibly attracts large investors. Apart from the conservative rate
of return, ease in liquidating the bonds and use as collateral for loan could
also generate investor interest.
However the banks' point of view, without a
proper hedging mechanism, managing the price volatility of gold would cause
headache.
The Government of India will launch its new ‘India Gold Coin’ and other ambitious schemes- Gold Monetization Scheme and Sovereign Gold Bond Scheme on November 05, 2015. Here is a quick glance at the same.
The Government Particulars
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Gold Monetisation
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Sovereign Gold Bond
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India Gold Coin
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GMS, which modifies
the existing ‘Gold Deposit Scheme’ (GDS) and ‘Gold Metal Loan Scheme (GML),
is intended to mobilise gold held by households and institutions of the
country and facilitate its use for productive purposes, and in the long run,
to reduce country’s reliance on the import of gold.
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To reduce gold
import for investment purpose and encourage investing in gold through ‘demat’
form.
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Setting up of
India's own gold coin brand.
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Nature of Scheme
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Physical deposit of
gold. No involvement of cash. Gold should be melted and deposited into gold
purification centers. Banks will give a certificate for holdings of their
gold. No involvement of cash.
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Issued by RBI on
behalf of Government of India with Public Issue price for the current tranche
set at Rs 2684 per gram. Applications to be accepted from 5th November 2015
to 20 November 2015 and the bond will be issued on 26 Nov 2015
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Buying in physical
form. 1. Anti counterfeit feature 2. Tamper proof packing 3. Bearing Ashok
Chakra
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Availability
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All scheduled
commercial banks except RRB.
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Through designated
Post offices and banks.
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Through MMTC
outlets.
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Participation
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Any individual or
entity can start the deposit scheme.
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Sale restricted to
Indian citizens, including individuals, HUFs, trusts, universities and charitable
institutions.
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Anyone can
participate. KYC norms will be the same as that for purchase of physical
gold. Documents such as Voter ID, Aadhaar Card or PAN etc will be required.
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Investment Limit
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Minimum investment
limit is 30 grams and there is no upper ceiling limit.
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Minimum 2 units or
2gm and maximum 500 gm in a year per person. Minimum cash investment for
initial purchase would be Rs 5400.
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Available in 5, 10
and 20 grams.
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Tax implication
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Completely tax
exempted. Maturity value and interest are tax free. (
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TDS is not
applicable to the interest component, but the interest earned on gold bond
will be taxed. (
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Maturity
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The designated banks will
accept gold deposits under Short Term Bank Deposit (STBD) (1-3 years) as well
as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes.
Provision for premature withdrawal subject to a minimum lock-in period and
penalty to be determined by individual banks.(
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Maturity period is 8 years
with an option to redeem from 5th year onwards. Redemption price calculated
based on prevailing market prices (i.e., simple average of closing price of
the previous week's (Monday-Friday) 999 purity gold published by IBJA (India
Bullion and Jewelers Association). Partial redemption is also possible. (Sovereign Gold Bond)
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Interest rate
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Interest rate on Medium and
Long Term Government Deposit (MLTGD) are 2.25 per cent and 2.20 per cent
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The interest rate is fixed at
2.75% per annum. It will be payable in every 6 months on the initial value of
the investment. (Sovereign Gold Bond)
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Redemption
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Redemption either in the form
of cash or gold as per the discretion of the investor
( |
Redemption in the form of
Cash at the time of maturity (
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Process
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Gold should be melted. Gold
collection and Purity melt the gold and provide purity certificate, basis
banks will accept it as deposit. RBI will maintain Gold deposit accounts
denominated in gold in the name of designated banks that will in turn hold
sub accounts of individual depositors.
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Buying in the form of Demat
format. Issuance of gold bonds equivalent of 50 tonnes would be around Rs
13500 crore.
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15000 5gm coins, 20000 10gm
coins and 3750 20gm bullion bar are available for purchase.
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Loan Facility
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Not possible.
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Can use as a collateral for
the loan. I.e. as same as physical gold. Loan-to-value ratio will be set
equal, so ordinary gold mandated by RBI.
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Other benefits
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Option to avail extra revenue
for gold which held idle. No worries over keeping gold in safe custody. No
extra charges for keeping gold safely.
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No dilemma for keeping gold
in safe custody. The bond will be listed in exchanges so will get an option
to exit early. Similar to physical gold, so the value of Bond will be vary
depend on physical gold price.
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Buying in physical form. 1.
Anti counterfeit feature will be protected from duplication 2. Tamper proof
packing for easy recycling. 3. Bearing Ashok Chakra
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About Geofin Comtrade Ltd...!
Geofin Comtrade Ltd., a brokerage firm dealing in
commodity futures is headquartered in Kochi which started its operations in Dec
2008. One of the largest national level broker specializing in commodities with
a presence in more than 125 locations across India, Geofin Comtrade Ltd. as of
today has a client base of more than 30,000 customers. Geofin Comtrade Ltd. has
membership in all 3 major commodities exchanges – MCX (Multi Commodity
Exchange), NCDEX (National Commodity and Derivatives Exchange) and NMCE
(National Multi Commodity Exchange) besides ACE Derivatives & Commodity
Exchange.
Geofin Comtrade Ltd. has one of the largest
research teams dedicated for commodities segment in India. The team currently
sits out of Kochi and Mumbai offices. The teams regularly prepare Daily
Technical Reports on Precious metals, Base metals, Energy complex, Edible Oil
and Spices. Apart from the commodities segment, Geofin Comtrade also prepares a
daily report on the currency segment to add value to clients having exposure to
the international commodities like gold and crude.
For further details, please visit – https://flip.geofin.co.in/comtrade/INDEX.html
Ashwini Karvi
Prana PR Pvt Ltd
M: +91 9920474967
| T: + 91 22 2288 4046/48/49 | F: +
91 22 2288 4058
E mail : ashwini.karvi@pranapr.com | W: www.pranapr.com
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