How effective will this scheme eventually be?
The draft Gold Monetization Scheme has been put up by the Ministry of Finance for public comments. Principally, it is different from the 1999 scheme in 2 ways. Firstly, the minimum entry point has been lowered from 500 gm to 30 gm. Second, the setting of interest rates has been left to the discretion of the banks.
Costs are still high
That was the bane of the old gold monetization scheme and that problem continues. If you add up the cost of hallmarking, assaying, purifying, storage it adds up to nearly Rs.1400-1500. That means even if you deposit 60 grams of gold, your first year interest will be eaten away by costs. That could be a major disappointment. Consequently, the reduction of entry level to 30 grams may not really add any practical value. Continue reading