RBI Issues Gold Monetization Scheme (GMS), 2015

By - Charanya CV on September 20, 2022

In exercise of the powers conferred to the Reserve Bank of India under Section 35A of the Banking Regulation Act, 1949, the RBI has made the following amendments to the Reserve Bank of India (Gold Monetization Scheme, 2015) with immediate effect.

Guidelines for Renewal/Redemption of MLTGD

I. General

a. The redemption of principal at maturity shall, at the option of the depositor, be either in an INR equivalent of the value of deposited gold at the time of redemption or in gold. However, any premature redemption of MLTGD shall be only in INR. The designated bank shall seek the option of collecting maturing proceeds in gold or an INR equivalent from the depositor at the time of initial deposit. Additionally, nominee details along with their share in the maturity proceeds may also be ascertained by the bank at the time of opening the account. In the case of existing accounts, designated banks shall ensure the availability of the aforementioned information and submit a compliance report to RBI within six months from the date of issue of these directions.

b. The interest accrued on MLTGD shall be calculated concerning an INR equivalent to the value of gold at the time of deposit and will be paid only in INR.

c. Designated banks shall inform the depositors about redemption through letter and other means (such as SMS, email, phone call etc. wherever details are available), at least 120 days before the redemption date and ask them to submit their response within 30 days on their preference for redemption or renewal. The bank, in its communication, should include a list of its state-wise branches where the facility of redemption in gold is available while also clearly specifying the additional administrative charges to be borne by the depositor for redemption in gold. In its communication to the depositor, the bank shall ask for options in the points outlined below.

II. Redemption in Gold

a. The quantity of gold shall be payable in multiples of 10 grams and the remaining fraction of gold shall be payable in INR (principal along with interest). With regards to fractional quantity, for example, 37.103 grams gold deposit, the fractional quantity (in this case, 7.103 grams, which is less than 10 grams) needs to be paid in INR at the prevailing gold rate on the maturity date. The applicable prevailing rate will be governed by provisions at para 2.1.1 of these Master Directions.

b. In case of redemption of deposit in gold, the administrative charge at a rate of 0.5%1 of the notional redemption amount as on the maturity date in terms of INR will be collected from the depositor and paid to the designated banks to cover logistical and operational costs involved in redemption. These administrative charges may be adjusted against the payment of fractional quantity in INR. If this amount is not found sufficient, then the administrative charges may be adjusted against the interest payable to the depositor or may be recovered in cash from the depositor.

c. If the depositor does not indicate any choice for mode of redemption (gold or INR) to the bank in response to its 120-day prior communication (issued as at para 2.4.i.(c) above), the option indicated at the time of account opening will prevail. Further, in case the gold is not redeemed by the customer on the maturity date, such stock will continue to be kept in the custody of the bank for a maximum period of 60 days. The depositor can renew the deposit during the 60-day period but would be liable to pay the applicable administrative charge (refer to para 2.4.ii.(b) above). If the depositor does not redeem the deposit on the due date or within 60 days from the maturity date and has also not renewed the deposit, the redemption will automatically be made in INR and the money shall be credited to the linked saving/current account of the depositor in the concerned bank. In case of non-availability of an active bank account, the banks will report the same to RBI on a priority basis.

d. The payment of interest in case of cumulative deposits shall be calculated concerning an INR equivalent to the value of gold at the time of deposit.

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