Author: Paul Ploumis20 May 2015 Last updated at 08:21:02 GMT

MUMBAI (Scrap Monster): The Indian Ministry of Finance has released draft guidelines on the proposed gold monetization scheme, aimed to liquidate huge stashes of gold held in Indian households and religious institutions and trusts. The scheme also aims to cut the country’s overdependence on gold imports, thereby conserving the forex reserves.

According to the draft, customers could make deposits of gold in any form-gold bars or jewellery. The purity of the gold can be tested at any one of the nearly 350 hallmarking centres certified by the Bureau of Indian Standards (BIS). The customer will also have to provide his consent by filling up the KYC Form, to melt the deposited gold. The pure gold from the jewellery will then be extracted and supplied to jewellers and other authorized agencies.

The customer will be provided with a certificate, using which he could open gold deposit with a bank. The rate of interest on these deposits will be decided by the bank. The Finance Ministry has assured attractive interest rates on gold deposits in an attempt to boost customer participation. Moreover, gold as little as 30 grams could be deposited. Customers can redeem these deposits either in the form of cash or gold, which must be clearly mentioned at the time of opening the deposit. The minimum period of gold deposits will be fixed as one year.

The draft guidelines indicate that banks in the country could benefit much from the scheme, as it opens another stream of income to them. Banks are also allowed to sell the deposited gold to generate foreign currency, which could then be used for lending to traders. They could also convert the gold into coins and sell them. In addition, banks could also lend gold to jewellers at higher rates. Gold purity analyzers and refiners too are likely to see sharp rise in business.

The new gold monetization scheme is likely to be exempted from capital gains tax, wealth tax and income tax.