Hoping to attract not only households but also temple trusts, the government is likely to offer an interest rate ranging between 2 to 3 per cent for the two gold schemes announced on Wednesday.
“The interest rate on the sovereign gold bond scheme will not be more than three per cent, while that on the gold monetisation scheme will be about 2.5 per cent,” said a senior government official. The return is much higher compared with that on the gold deposit scheme 1999 that offers an interest rate between 0.75 per cent and 1 per cent on terms between three and five years.
The official said that the plan is to keep the interest rate lower on the GMS as compared to that on the gold bond scheme to ensure that people do not buy gold to deposit it and then buy bonds. The finance ministry is expected to notify the schemes within the next two months and plans to raise at least Rs 15,000 crore from gold bonds this fiscal.
“We expect to raise at least Rs 15,000 crore from sovereign gold bonds, subject to the government borrowing programme,” said the official, adding that it will be done in discussion with the RBI and is likely to be done in at least two tranches.
Meanwhile, the GDS could help bring in over 20 tonne of gold annually into the formal banking sector. The finance ministry has also dropped plans to use the gold deposits as part of the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements of banks this fiscal. “There has been no further discussion with the RBI on the issue,” clarified the official.
The official also clarified that fears over scrutiny by income tax department over subscribers to the scheme are “unfounded”.
“The existing KYC scheme would continue. Suspicions will not arise in the normal course of transactions,” stressed the official.
The Union Cabinet had on Wednesday approved the GMS and the sovereign gold bonds scheme that aim to curb demand for gold in the country, which imports nearly 1,000 tonne of the metal annually.
While individuals and institutions can deposit a minimum of 30 grams and as much as 500 grams of gold bullion or jewellery into a gold deposit account and earn interest on it under the GMS, the bond scheme aims to discourage sale of gold in physical form would issued in two, five and 10 grams of gold or other denominations and the tenor of the bond could be for a minimum of five to seven years. Based on demand and subscription, the finance ministry would review the two schemes next year.