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Gold is the most useful metal in jewelry. Rings, bracelets,
necklaces, earrings, and many other jewelry items are fashioned
from Gold, and Gold is the main precious metal used for jewelry
settings. Gold masks and ornaments were used by many ancient
civilizations, and Gold has also been used in coinage since the
earliest of days. Pure Gold lacks resistance to pressure and








always alloyed with other metals to increase its toughness and

durability. The purity of Gold depends on the percentage of
alloyed metal, and this number is measured in karats. The karat
measurement determines the percentage of gold to other metals
on a scale of 1 to 24, with 24 karats being pure gold. Common
karat weights are 22 kt (91.67% gold), 18 kt (75% gold), 14 kt
(58.33% gold), and 10 kt (41.67% gold). Pure 24 kt Gold is
never used in jewelry as it too flexible and will be bent and





Several different metallic elements are alloyed with Gold,

and some are used specifically to produce a certain color or tone

in the Gold. The main metals alloyed with Gold are copper,
silver, palladium, nickel, zinc, and iron. White Gold, which has
become very popular in jewelry, is mainly alloyed with nickel
and zinc, and occasionally palladium. White Gold resembles the
color of Silver, but it is far more resistant to corrosion and will
not tarnish like Silver. Rose Gold, which has a slightly reddish
tone, is alloyed mostly with copper. Green gold, which appears
greenish-yellow, is alloyed with silver, and Blue Gold, which is
gold with a whitish-blue tone, is alloyed with iron.
India's Golden Tradition
Gold is part and parcel of India's culture and tradition. As
money, jewelry, status symbol and investment, gold has played a
crucial role in the lives of Indians for centuries. A family's
wealth was determined on the quantity of gold and land they
had. Gold is considered Lakshmi (the Hindu goddess of wealth)
and a symbol of prosperity.
Traditionally and, as a religious practice, an Indian woman
wears ornaments throughout her life. Gold is her metal of choice
for jewelry. Usually, from childhood till the end of her life, the

Indian woman will adorn herself with various gold ornaments,

depending on her wealth and status. The trend in recent times is
more toward platinum and white gold among the urban elite, but
for the middle- and lower-class families, jewelry means only
Nothing can replace the status and importance of gold in the
Indian society. In south India, the first food a newborn consumes
will contain gold. According to tradition, the elder family
member makes a paste of a local herb and a miniscule quantity
of gold and feed the baby its first morsel. This is believed to
bring wealth and prosperity to the baby in his/her life.
Gold is also part of the religious rituals at homes and temples. In
several states, the yellow metal is worshipped as a symbol of
Lakshmi and wealth.
No wedding is complete without gold, and gold ornaments are
exchanged during wedding ceremonies, no matter which religion
the bride and groom may belong to. Mangalsutra - a neck chain
with a mandatory gold pendent - is presented by the groom to
the bride during the Hindu wedding ceremony. Apart from this,

Indian brides are bedecked in gold at their weddings. Though

dowry is banned in India, it still exists in practice and gold is the
most common form of dowry given to daughters at the time of
their wedding.
The Akshaya Trithiya is an auspicious day in the Hindu calendar
to buy gold. Devotees celebrate this day (usually in April) by
buying gold. In recent years, this festival has become highly
commercialized as the jewelers have started promoting the sales
with discounts. Gold ornaments worth millions of rupees are
purchased across the country on this day.

Gold monetisation was first rolled out by then finance minister Morarji
Desai in 1962. Gold bonds, as they were called, were opened for
subscription between November 12, 1962 and February 28, 1963 for a
15-year tenure. 16 tonnes of gold worth Rs 8.61 crores was mobilised.
Morarji Desai admitted it "did not come up to expectations". In 1965,
another gold monetisation scheme (called the gold bond scheme again)
was launched offering tax immunity for people who hadn't declared their
gold holdings earlier.

But that optimism proved misplaced and the scheme too failed to
mobilise a significant amount of gold. The third attempt at gold
monetisation - the National Defence Gold Bonds scheme of 1980 - was
again a relative failure, managing to raise only 13 tonnes. In 1993, the
Narasimha Rao government with Manmohan Singh as Finance Minister
had another go at gold monetisation. The gold bond scheme was
launched by issuing the Gold Bonds (Immunities and Exemptions)
Ordinance in March 1993. The scheme, which asked no questions about
the origins of the gold, ran for three months from March 15, 1993.
Investors, who wished to avail the scheme, were expected to deposit a
minimum of 500 grams of gold to be melted later. There was no
maximum limit for subscription.
In 1999, the government once again launched a gold deposit scheme,
this time open-ended, which depositors could avail by depositing a
minimum of 500 grams of gold like in 1993. There was again no
maximum limit. There was, however, no amnesty clause as the
government had furnished an undertaking in 1997 to the Supreme Court
that they would offer no such amnesty in the future. The scheme has
managed to collect "15 tonnes of gold to date


1. Few banks offer the Gold Deposit Scheme (GDS).

2. Those banks that do have GDS, set the minimum deposit amount at
anywhere between 500g to 1kg of gold, making the Scheme more
suitable for temples than individuals.
3. The product is not widely marketed.
4. Banks cannot easily assay the gold to decipher its caratage and purity.
As interest on the GDS is typically paid in grams of gold, banks cannot
offer the product unless they can quickly ascertain its quality.
5. Banks do not accept jewellery under the GDS, assuming that
customers will not want to deposit jewellery and receive plain gold when
their investment matures.
Most Indians not being keen on melting family heirlooms and gold
jewellery they hold dear has also been cited by experts as the reason for
the failure of these schemes.


The Gold monetization scheme is a government of India sponsored
scheme to put your idle gold into the work. There is 20,000-ton
gold, lying in the households of India. The government wants to
recycle this gold so that import of the gold can be reduced.
In the Gold Monetization Scheme, you put your gold with the
bank. The value of the gold rises along with the market prices.

Besides this, you also get the interest on your gold. The interest
is also in the form of gold. At the time of maturity, your gold
itself gets heavier because of regular gold interest. You can
redeem your gold in the form of cash or gold. The gold kept
with the bank is used for the gold lending.
Gold lying in the locker appreciates in value if gold price
goes up but it doesn't pay you a regular interest or dividend. On
the contrary, you incur carrying costs on it (bank locker
charges). The monetisation scheme will allow you to earn some
regular interest on your gold and save you carrying costs as well.
It is a gold savings account which will earn interest for the gold
that you deposit in it. Your gold can be deposited in any physical
form jewellery, coins or bars. This gold will then earn interest
based on gold weight and also the appreciation of the metal
value. You get back your gold in the equivalent of 995 fineness
gold or Indian rupees as you desire (the option to be exercised at
the time of deposit).
The objectives of the Gold Monetization scheme are:

ii. To provide a fillip to the gems and jewellery sector in the

country by making gold available as raw material on loan from
the banks.
iii. To be able to reduce reliance on import of gold over time to
meet the domestic demand.


Any form of gold can be used for this scheme. It may be

bullion or jewelry.

Minimum deposit of pure gold should be 30 Gold


The interest would be given in gold grams.

Like a fixed deposit, the breaking of lock-in period will be


There would be a penalty on premature redemption

including part withdrawal.

Minimum tenure of Gold Monetization Scheme is one year.

Except short term deposit, the redemption of Gold

MonetizationScheme would be in rupees.

For short term deposit, the mode of redemption (gold or

cash) should be fixed in the beginning. The change of
redemption mode in between is possible at the discretion of the

Redemption of fractional quantity (for which a standard

gold bar/coin is not available) would be paid in cash.

The rate for the valuation of gold, at the time of

the redemption, would be the prevailing market rate.


I. Purity Verification and Deposit of Gold

Purity Testing Centres: There are at present 350 Hallmarking Centres
that are Bureau of Indian Standards (BIS) certified spread across various
parts of the country (List of the number of centres in each states is at

Annexure-II). These centres may not necessarily be jewellers. They are

engaged in certifying the purity of the gold that the jewellers
manufacture on a daily basis and for which they charge a fee from the
jewellers. These Hallmarking Centres will act as Purity Testing Centres
for the GMS as they are well equipped to conduct a test of purity of the
jewellery in a short span of time.
Preliminary Test:In a Purity Testing Centre, a preliminary XRF
machine-test will be conducted to tell the customer the approximate
amount of pure gold. If the customer agrees, he will have to fill-up a
Bank/KYC form and give his consent for melting the gold. If the
customer does not agree to the XRF machine test, he can take his
jewellery back at this stage. The time spent by the customer will be
about 45 minutes in the centre up till this stage.
Fire Assay Test:After receiving the customers consent for melting the
gold for conducting a further test of purity, at the same collection centre,
the gold ornament will then be cleaned of its dirt, studs, meena etc. The
studs will be handed-over to the customer there itself. Net weight of the
jewellery will be taken after such removals and told to the
customer.Then, right in front of the customer the jewellery will be
melted and through a fire assay, its purity will be ascertained. These
centres have viewing galleries from where the customer can see the
entire process. The time taken is expected not to exceed 3-4 hours.

Deposit of Gold:When the results of the fire assay are told to the
customer, he has a choice of either refusing to accept, in which case he
can take back the melted gold in the form of gold bars, after paying a
nominal fee1to that centre; or he may agree to deposit his gold (in which
case the fee will be paid by the bank). If the customer agrees to deposit
the gold, then he will be given a certificate by the collection centre
certifying the amount and purity of the deposited gold.
Conditions:The minimum quantity of gold that a customer can bring is
proposed to be set at 30 grams, so that even small depositors are
encouraged. Gold can be in any form(bullion or jewellery).
II. Opening of Gold Savings Account with the banks.
Gold Savings Account:When the customer produces the certificate of
gold deposited at the Purity Testing Centre, the bank will in turn open a
Gold Savings Account for the customer and credit the quantity of
gold into the customers account. Simultaneously, the Purity Verification
Centre will also inform the bank about the deposit made.
Interest payment by banks:The bank will commit to paying an interest
to the customer which will be payable after 30/60 days of opening of the
Gold Savings Account. The amount of interest rate to be given is
proposed to be left to the banks to decide. Both principal and interest to
be paid to the depositors of gold, will be valued in gold. For example if

a customer deposits 100 gms of gold and gets 1 per cent interest, then,
on maturity he has a credit of 101 gms.
Redemption: The customer will have the option of redemption either in
cash or in gold, which will have to be exercised in the beginning itself
(that is, at the time of making the deposit).
Tenure: The tenure of the deposit will be minimum 1 year and with a
roll out in multiples of one year. Like a fixed deposit, breaking of lock-in
period will be allowed.
Tax Exemption:In the Gold Deposit Scheme (1999), the customers
received exemption from Capital Gains Tax, Wealth tax and Income Tax.
Similar tax exemptions are likely to be made available to the customers
in the GMS after due examination.
III. Transfer of Gold to the Refiners
Refineries: At present there are about 32 refineries in the country. The
laboratories of some of these refineries are NABL accredited which
means that the process that they adopt is certified.BIS has been asked by
this Department to ascertain if it can conduct accreditation of the
products being produced in these refineries also.
Transfer of gold to refineries: Purity Testing Centres will send the gold
to the refiners. The refiners will keep the gold in their ware-houses,
unless the banks prefer to hold it themselves.

Payment:For the services provided by the refiners, they will be paid a

fee by the banks, as decided by them, mutually.
IV. Utilization of Deposited Gold
CRR/SLR: To incentivize banks, it is proposed that they may be
permitted to deposit the mobilized gold as part of their CRR/SLR
requirements with RBI. This aspect is still under examination.
Foreign Currency: Banks may sell the gold to generate foreign
currency. The foreign currency thus generated can then be used for
onward lending to exporters / importers.
Coins: Bank may convert mobilized gold into coins for onward sale to
their customers
Exchanges: Banks to buy and sell on domestic commodity exchanges,
where mobilized gold can be delivered.
Lending to jewellers: For lending to jewellers
V. Lending the Gold to the Jewellers
Gold Loan Account:
The jewellers, on the basis of the terms and conditions of the banks, will
get a Gold Loan Account opened at the bank.
Delivery of gold to jewellers:

When a gold loan is sanctioned, the jewellers will receive physical

delivery of gold from the refiners. The banks will in turn make the
requisite entry in the jewellers Gold Loan Account.
Interest received by banks:
The interest rate charged by the banks will have to cover the following:
Interest rate paid to the depositors of gold
Fee paid to the refiners and Purity Verification Centres.
Profit margin of the banks
The banks can directly get gold from the international market on a
consignment basis and lend it to the jewellers. If this route is more
lucrative, then the entire purpose will get defeated. Thus, this aspect will
also have to be kept in mind, while deciding the interest rate.
VI. MoU between Banks, Refiners and Purity Testing Centres
The banks will enter into a tripartite MoU with refiners and purity
testing centres, that are selected by them to be their partners in the
The MoU will clearly lay down the details regarding payment of fee,
services to be provided, standards of service and the details of the
arrangements between the banks, refiners and purity testing centres.

In the short term Gold Monetization Scheme, you deposit the gold for 13 years. The interest rate of this type of scheme is decided by the bank.
You can get back the deposit in the form of gold or rupee. The deposit
period can be extended multiple times in the blocks of one year.


Medium term Gold Monetization Scheme is for the deposit of 5-7 years.
The interest rate of such deposit is fixed by the government in
consultation with the Reserve Bank of India. The redemption can be
only in the cash.


This scheme is for the deposit of 12-15 years. The interest rate is fixed
by the government in consultation with the Reserve Bank of India. The
redemption would be in the cash only

Minimum/ maximum deposit:

30 grams of 995 finenes in raw gold (bars, coins, jewellery, exclusind
stones and other metals). There is no maximum limit under the scheme.

Benefits of Gold Monetization Scheme

Benefit To Customers
1. The gold grows itself in this scheme. The weight of gold
remain same forever if you keep is in the house. But the
GMS increases the weight of the gold according to the
given interest rate.
2. You need not to worry about the security of the gold. It
cant be stolen.
3. You can save the expense of locker. Lockers are not
4. You will get the true value of your gold.
5. Getting cash in place of gold is very easy.

Tax Benefit
There is no tax at all. The investment, interest and maturity is
tax-free. There is no capital gains tax on the gold interest.
There is wealth tax as well.
Benefit To Government

It will reduce the countrys reliance on the import of gold to

meet domestic demand.

Gold Monetization Scheme would benefit the Indian gems

and jewelry sector which is a major contributor to Indias

The mobilized gold will also supplement RBIs gold

reserves and will help in reducing the governments borrowing
Disadvantages of Gold Monetization Scheme
The GMS has some disadvantages.

1. You have to part the gold for some years. You cant see it
physically till the maturity.
2. The gold jewelry will lose its form. The gold is melted in
the Gold Monetization Scheme.
3. The impurities can reduce the weight of your gold.
4. You have to go through the tedious process of Gold
Monetization Scheme.

Recent article on reaction of Indian temple about

gold monetization schemes
As the government seeks to monetise gold worth an estimated USD one
trillion lying idle, all eyes are on their biggest repositories the temples
but many of them fear that melting of the ornaments donated by
devotees may hurt religious sentiments.
Officials at a number of rich and famous temples across the country said
they may not be able to immediately participate in the scheme, while a
few others said the scheme was worth exploring but a final decision was
yet to be taken.
For some temples, including Sree Padmanabhaswamy Temple in Kerala
and the Shirdi Sai Baba temple in Maharashtra, the ongoing court cases
are coming in the way.

The interest remains lukewarm among major temples in Kerala,

Karnataka, Telangana and Rajasthan among other states, while a few in
Andhra Pradesh, West Bengal and Gujarat have shown initial interest.
However, most of them are concerned about issues like loss of value in
the melting process and the religious sentiments of the devotees who
donate gold ornaments in the name of the deities of the respective
The Gold Monetisation Scheme, an ambitious initiative launched by
Prime Minister Narendra Modi last month, aims to bring an estimated
22,000 tonnes of gold lying idle with households, religious institutions
and others into the financial system in return for a regular interest payout
and the market-linked appreciation value.
The gold can be deposited even in the jewellery form, but it gets melted
and the value is determined after testing its purity. The depositor can
choose an option to get back the gold at a later date in the equivalent of
995 fineness gold or Indian rupees as they desire, but not in the same
Among various temples in Gujarat, the famous Ambaji temple has ruled
out depositing its gold for the scheme at present, while Somnath temple
has prepared a proposal in this regard and a final decision would be
taken by its trustees.
Dwarkadhish temple in Devbhumi Dwarka is yet to take a call, but the
chairman of the temple trust committee H K Patel said the scheme was
worth giving a thought.
The famous Siddhivinayak Temple in Mumbai also appears interested in
exploring the scheme as it is looking at options to utilise its 160 kg of
gold reserves, out of which about 10 kg is already deposited with a bank.

The high-level Investment Committee of Tirumala Tirupati

Devasthanams (TTD), which manages the worlds richest Hindu temple
of Sri Venkateswara Swamy, will also meet soon to discuss the issue of
depositing its gold under this scheme.
Kanakadurgamma Temple in Vijayawada, the second richest temple in
Andhra Pradesh, however has no plans to participate in this scheme,
while neighbouring Telangana government has not taken any decision as
yet on participating in the Scheme.
The Devaswom Boards controlling most of the temples in Kerala are
showing mostly lukewarm response to the central governments scheme,
except for the Guruvayour Devaswom that manages the famous Sree
Krishna Temple at Guruvaoyur.
State Minister for Devaswom V S Sivakumar said the Devaswom boards
are autonomous bodies and the government cannot give any direction on
matters like these.
It is for the respective Devaswom Boards to take a decision, he said.
In case of the Travancore and Cochin devaswom boards, any decision on
such matters would need to be ratified by the Kerala High Court, which
is the audit and expenditure controller of these Boards.
Besides, the gold in custody of most of these temples are in the form of
small jewellery items and the Devaswom boards fear that they would
have to bear a loss as the jewellery would be melted after being
deposited under the scheme.
Officials said the boards also fear that any loss of weight after melting
would unnecessarily invite allegations of irregularities and corruption.

So, boards have not shown much interest in the scheme, a senior
Travancore Devaswom Board (TDB) President Prayar Gopalakrishnan,
who took charge of the office last month, said that he was yet to study
the details of the scheme.
The famous Lord Ayyappa Temple at Sabarimala, visited by millions
every year, is among the several shrines under TDB.
Cochin Devaswom Board (CDB) member E A Rajan said it does not
have surplus gold that could be deposited under the scheme.
Gold in the temples are used to attire the idols. They are in jewellery
The famous Sree Padmanabhaswamy Temples Executive Officer K N
Sateesh said all temple affairs were under the scrutiny of the Supreme
We cannot say anything on these matters now, he said while adding
that everything will depend on the court decision.
Guruvayour Devaswom, which manages the famous and one of the
riches temples Sree Krishna shrine at Guruvayour, said there was no
problem in participating in the scheme but they did not have any excess
gold to deposit at present.
There is no problem for us to deposit in the scheme, Mallessery
Parameswaran Namboothirpad, Member (Administrative) of the
Managing Committee, said.
Nearly 500 kg gold was already deposited under a scheme with State
Bank of India, he said, while adding that the temple receives an average
of three kg of gold every month.

We are ready to deposit in the scheme. But at present we do not have

any surplus, he added.
Looking to give a push to the scheme, the All India Gems and Jewellery
Trade Federation is working on suggestions to be submitted to the
central government.
We have met the finance ministry officials and will soon submit our
suggestions in which we will ask the government to introduce a simple
and practical process for jewellers to act as collection centers.
The jewellers as of now are facing hardship to meet the conditions set
by the government, former chairman of All India Gems and Jewellery
Trade Federation Bachhraj Bamalwa said.
Only targeting temples will not help much in generating the flow of
gold to the scheme. Retail public participation is needed and for that the
process has to be made flexible and more practical, he said.
State-run MMTCs Chairman and Managing Director Ved Prakash said
discussions are continuing with the banks, verification centres and
Meanwhile, institutional gold has started coming like Tirupati has
indicated 1.5 tonne, Shirdi 500 kgs. We have started dialogue with
smaller temples of Himachal Pradesh and Haryana and gradually to
temple trusts of other states, he added.
Among temples in West Bengal, Dakshineswar Kali Temples trustee
and secretary Kushal Chowdhury welcomed the scheme saying it is a
very good idea.

We are interested in participating in it. What is the point of leaving the

gold lying idle in our vaults? It is better if it is used for welfare of the
nation, he said without divulging quantity of gold the temple holds.
However, the temple committee of Tarapith is yet to give any thought to
the scheme, a senior official said. The Kalighat temple officials were not
available for comments.
In Karnataka, Muzrai Minister Manohar Tahsildar said the state
government has not yet taken any decision as yet on the gold
monetisation scheme floated by the central government as it is still
weighing the pros and cons of it.
We have to take a decision on the scheme. We are weighing the pros
and cons of implementing the scheme under which temples can deposit
their gold with banks, Muzrai said.
The Religious and Charitable Endowments (Muzrai) Commissioner had
earlier written to the Principal Secretary of Revenue explaining the
advantages and disadvantages of implementing the scheme.
Tahsildar, however, said any discussion was yet to take place on the
letter as it has just been a month that he has taken charge as Muzrai
The letter raised concerns of hurting religious sentiments of the people
in melting of gold for depositing with banks.
It also raised security concerns in transporting these idols from temples
to melting units and the high costs involved in doing so. However, it also
explained the benefits.

Somnath Temple to invest in Gold

Monetisation Scheme
AHMEDABAD: The Somnath Temple Trust is all set to become
Gujarat's first temple to deposit its idle gold in the Gold Monetisation
Scheme as its trustees including Prime Minister Narendra Modi have
given their nod to invest the yellow metal reserves in the scheme.
The trust has around 35 kg of gold and will deposit the gold which is not
in day-to-day use of the temple.
The decision was taken during the recently held meeting of trustees at
Modi's residence in Delhi on January 12, said the trust secretary P K
Lahiri, who is also one of the trustees of the Somnath Temple, situated in
the Gir-Somnath district.
"During the meeting, all the trustees have agreed to the proposal of
depositing the gold, which is not in day-to-day use of the temple, in the
Gold Monetisation Scheme," said Lahiri.
According to him, the trust is having around 35 kg of gold, which is
either in the form of pure gold or ornaments. Now, the management will
segregate the pure gold from the whole lot to finalise the quantum of
gold which can be deposited.

Balaji temple will benefit a lot from gold

Lord Venkateswara Swamy, popularly known as Balaji, will be the
biggest beneficiary of the gold monetisation scheme announced by the
Narendra Modi government recently. The Tirumala Tirupati
Devasthanam (TTD), which runs the Balaji temple atop the Tirumala
Hills in Tirupati, is mulling depositing around eight tonnes of gold under
the scheme.
Already, the TTD has deposited six tonnes of gold and jewellery in three
public sector banks SBI, SBH and Indian Bank at a nominal interest
rate of less than 1% per annum. However, after the new scheme was
unveiled, the interest rate is going to be double at around 2%. The TTD
will wait to see which bank offers the highest rate for its gold.