Gold Scheme Guidelines Issued By RBI

Gold is a very important metal in Indian households as both a precious ornament and a secure investment. However, physical gold comes with many challenges, like keeping it safe from threat of theft, storage, and more. The government of India, to tackle the increasing demand for physical gold, launched several gold schemes for the public to invest, making it more accessible and convenient for anyone who wishes to invest in gold. So, if you are considering investing in gold schemes, you must first go through the RBI guidelines for each gold scheme to stay informed before you make your investments.

These gold schemes help to curb the high demand for imported gold, thereby managing the trade deficit while providing you with the opportunity to safely invest in gold through secure and regulated methods as per the gold scheme guidelines issued by RBI.

Table of Contents:

• ⇾ Overview of Gold Schemes by RBI
• ⇾ RBI Sovereign Gold Bond Scheme (SGB)
• ⇾ RBI Indian Gold Coin Scheme (IGC)
• ⇾ RBI Gold Monetisation Scheme
• ⇾ Ways to Subscribe to Gold Schemes
• ⇾ Frequently Asked Questions

Overview of RBI Gold Schemes

The Government of India in collaboration with the Reserve Bank of India (RBI) launched three main gold schemes which offer many unique benefits, these are:

• Sovereign Gold Bond (SGB) Scheme
• Indian Gold Coin Scheme (IGC)
• Gold Monetisation Scheme (GMS)

RBI Guidelines for Sovereign Gold Bond Scheme (SGB)

The Sovereign Gold Bond (SGB) scheme is a scheme that provides an alternative to buying physical gold. Instead of buying and storing gold, individuals, and institutions can invest in gold-backed bonds that offer financial returns and other benefits. You can subscribe to these gold bonds according to the gold scheme guidelines issued by RBI.

Sovereign Gold Bond Scheme Guidelines Issued By RBI

The gold scheme guidelines issued by RBI on Sovereign Gold Bonds provide clarity on the investment limits, eligibility, and interest payments offered by the scheme. These guidelines are crucial for promoting accessibility, secure transactions, and transparency, addressing concerns about the scheme's availability, and participation process, and providing a safe alternative to physical gold investments. These guidelines are given below:

• Eligibility: Residents of India are eligible to invest in the RBI SGB scheme, including individuals, Hindu Undivided Families (HUFs), charitable institutions, trusts, and universities. However, non-resident Indians (NRIs) are not eligible to invest in SGB.
• Minimum and Maximum Investment: The minimum investment in gold bonds by RBI is 1 gram of gold, and the maximum limit is set at 4 kilograms per individual, 4 kilograms for HUFs, and 20 kilograms for trusts and similar entities in one financial year.
• Subscription Period and Issuance Dates: The subscription for the RBI Gold Bond scheme is open periodically, and the public can subscribe during the designated window. The subscription process is carried out by scheduled commercial banks and designated post offices. Investors can check SBI Sovereign Gold Bonds, ICICI Sovereign Gold Bonds, or other reputable banks to check the tranche dates for subscription.
• Tenure and Redemption: The bonds have an 8-year tenure, with an early redemption option after 5 years, only on interest payment dates. The early exit can be availed if required, but the final redemption price will be based on the market value of gold at that time.
• Pricing of Bonds: The bonds will be priced in grams of gold. The price of these bonds will be calculated based on the closing price of gold of 999 purity (24-karat) and will be published by the India Bullion and Jewellers Association (IBJA) in Indian Rupees. For the first tranche, the price of SGB was set at ₹2,684 per gram.
• Interest Rate: Investors will earn an interest rate of 2.50% per annum on the initial investment amount, which will be paid semi-annually. The interest earned will be credited directly to the investor’s bank account.
• Collateral for Loans: One of the benefits of the SGB scheme is that these bonds can be used as collateral for loans. They are accepted by most financial institutions for securing loans.
• Tax Treatment: The interest earned on the SGBs is taxable as per the Income Tax Act, 1961. However, the capital gains arising from the redemption of SGB are exempt from tax. If an investor sells the bond before maturity, capital gains will attract long-term capital gains tax, with indexation benefits.

Benefits of SGB

The SGB offers several benefits, these are:

• No need for physical storage, which eliminates the risk of theft or loss.
• Investors earn a steady interest income along with potential capital appreciation from rising gold prices.
• Tax benefits on redemption make it a more profitable investment compared to physical gold.

RBI Guidelines for Indian Gold Coin Scheme (IGC)

The Indian Gold Coin Scheme (IGC) is a scheme that promotes the use of gold coins minted in India. These coins provide investors with an alternative to imported gold and serve as a secure investment with assured quality and purity.

Indian Gold Coin Scheme Guidelines Issued By RBI

The Indian Gold Coin (IGC) Scheme, introduced by the Government of India, offers a secure, government-backed option for purchasing gold coins of 24-carat purity. The RBI has issued guidelines to regulate this scheme, ensuring transparency in pricing, purity, and accessibility for investors. These guidelines are as follows:

• Purity and Design: Indian Gold Coins are minted with 24-karat gold of 999 purity. These coins feature the Ashoka Chakra, ensuring their authenticity. They come in denominations of 5 grams, 10 grams, and 20 grams.
• Availability: These coins are available for purchase from designated banks, post offices, and some jewellers. The scheme ensures that Indian citizens have access to pure and reliable gold coins that are backed by the Government of India.
• Tradability and Liquidity: Indian Gold Coins can be easily traded, and they hold a high resale value because of their guaranteed purity and government backing. Investors can either sell these coins back to authorised outlets or use them as collateral for loans.

Benefits of Indian Gold Coin Scheme

The benefits of Indian Gold Coin scheme are:

• Guaranteed purity and quality, with the emblem of the Ashoka Chakra as proof.
• Can be easily liquidated or pledged as security for loans.
• Encourages investment in domestically produced gold, reducing reliance on imported gold.

RBI Guidelines for Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS) is an RBI gold scheme that allows individuals and institutions to deposit their gold in the form of jewellery, coins, or bars in exchange for interest. The scheme gives those who hold gold an opportunity to earn a return on their gold, which would otherwise remain idle in lockers.

Gold Monetisation Scheme Guidelines Issued By RBI

The Gold Monetisation Scheme (GMS) is governed by RBI's guidelines to ensure smooth implementation, providing a structured process for gold deposits, withdrawals, and interest payments, these are:

• Eligibility: Any resident Indian, including individuals, HUFs, charitable organisations, trusts, and companies, can participate in the RBI Gold Monetisation Scheme. Deposits can be made in the form of jewellery, coins, or bars.
• Minimum Deposit: The minimum deposit is set at 30 grams of gold. There is no maximum limit on deposits.
• Deposit Tenures: The scheme offers three types of deposits:
1. Short-term deposits (1 to 3 years)
2. Medium-term deposits (5 to 7 years)
3. Long-term deposits (12 to 15 years)
• Interest Rates and Payments: The interest rate on GMS deposits varies depending on the tenure of the deposit. The interest rate for medium deposits is 2.25% p.a. And the interest rate for long-term deposits is 2.50% p.a. It is paid either in gold or its equivalent in cash. For example, if an individual deposits 100 grams of gold for a medium-term deposit, they would receive their deposit back along with the applicable interest in either gold or cash, as per their choice.
• Redemption and Withdrawal: Upon maturity, depositors can withdraw their gold in the form of either gold or cash, based on the market value of gold at the time of redemption.

Benefits of Gold Monetisation Scheme

The RBI’s Gold Monetization Scheme has various benefits, these are:

• Earns interest on idle gold, which would otherwise be lying unused.
• Safe and secure storage of gold, with no risk of theft or loss.
• Flexible options for short, medium, and long-term deposits.
• At the end of the tenure, depositors can choose to receive either gold or cash.

Ways to Subscribe to RBI Gold Schemes

There are several ways by which you can apply for these gold schemes, you can subscribe to them through scheduled commercial banks, designated post offices, and other authorised outlets. To invest, you will need to submit the required identification documents, such as PAN cards, for the application process. The subscription windows are open for a limited period, and the schemes are issued in tranches.

• Subscription Period: The subscription period for the schemes will be clearly mentioned on the websites of commercial banks like SBI, ICICI, HDFC and more. Investors are encouraged to apply during the subscription period to take advantage of the scheme. For example, the tranche period for the year 2023-2024 is February 12 - February 16, 2024.
• Application Process: Applications can be made in person at banks or online through certain commercial banks. Required documents include valid identification proof, such as PAN cards.

Beside Gold Scheme guidelines issued by RBI, you can also check other related gold topics