One of the largest public sector banks – State Bank of India (SBI) – has re-launched the gold deposit scheme with an aim of bringing into circulation the privately held stock of gold to reduce India’s dependence on imported gold due to the rising cost of gold imports.
This scheme, first launched in November 1999, failed to appeal to the mass public and was withdrawn within a few years of its launch.
Details of SBI Gold Deposit Scheme:
Depositors / Investors can earn interest by investing their surplus gold, in any form, with the bank. The scheme is targeted at the wealthy and high net worth investors, temples and trusts for whom gold is just another asset. Temples are the most preferred customers as they receive huge donations in gold.
The minimum amount of gold deposit is pegged at 500 grams (1/2 kg) which is mostly beyond the reach of general public at large. The scheme is currently available only at 50 select branches of SBI. The bank is also setting up a separate branch at Mumbai’s gold hub – Zaveri Bazaar – to manage these deposits.
The gold being deposited will be checked for purity and melted at the government’s mint. On this the government would issue a certificate of purity that can be used by the investor to claim back the gold on maturity.
The expense incurred for assessing the purity of the gold will be completely borne by the bank and will not be passed on to the investor, bank officials announced.
The deposited gold will earn an interest depending on the tenure of the investment. For a period of 3 years the interest is pegged at 1%, 1.2% for 4 years and 1.5% for 5 years. The investment will be locked-in for one year.
In case of premature withdrawal after the lock-in period but before maturity, a penalty of 0.5% shall be charged if the withdrawal is made within 3 years and 0.25% thereafter.
Interest, in this case, is calculated in grams instead of rupees. Hence, an investment of 500 grams of gold for three years will earn 5 grams of gold as interest per annum, compounded annually.
On maturity, the interest so earned will be converted into rupee equivalent of gold and will be paid to the investor. However the investor will be given the option to claim back pure gold (0.999 purity) or cash equivalent of gold as on that day.
The interest earned on this and tax on any capital gains due to a rise in price of gold after maturity is exempted from tax. The gold deposited will also be exempted from wealth tax.