Gold Deposit Scheme From State Bank of India (SBI)

Gold Deposit Scheme is back. The Rising cost of gold imports has once again prompted the largest public sector bank of the country, SBI, to re-launch its Gold deposit scheme to help bring privately held stock of gold in circulation and reduce country's dependence on imported gold.

This scheme which was first launched in Nov '99 at the initiation of the then union finance minister Yashwant Sinha in the budget 1999-2000 did not gel well with the public at large and was thus withdrawn within a few years of its launch.

The scheme, as the name suggest, invites investors to deposit their surplus gold, in any form, with the bank and earn interest on the same.

India being a country where gold commands more of an emotional attachment than a mere source of investment amongst the masses, the scheme is targeted only to those affluent and high net worth investors, temples and trusts for whom gold is just another asset class.

The minimum amount of gold deposit is thus pegged at 500 grams (1/2 kg), which is probably beyond the reach of general public at large.

Famous temples across the country are known to receive huge donations in gold and they are likely to be most preferred customers for the bank under this scheme.

During its previous phase, the scheme had garnered 400 kgs of Gold alone from Guruvayur Devaswom in Kerala. If the scheme does a turnaround this time, it may find its potential customers in the very famous Siddhivinayak Temple, Mahalaxmi Temple, Lalbaug Ka Raja and Shirdi's Sai Baba Temple to name a few.

The scheme has just been re-launched and is available only at select SBI branches. Currently only 50 branches across the country have been nominated to accept these deposits of which four are in Maharashtra.

Only two branches in Mumbai have been nominated for the purpose, namely, Mumbai Main Branch and Shivaji Park Branch. The bank is also setting up a separate branch at the gold hub of Mumbai - Zaveri Bazaar to manage these deposits.

The gold so deposited with the bank shall be checked for purity and melted at the Government of India mint. A certificate of purity will then be issued by the Government, which can be used by the investor to claim back the gold after the maturity period.

The bank has also clarified that the expenses incurred on assaying of gold shall be borne by the bank and will not be passed on to the customer.

During the investment tenure, the deposited gold will earn an interest, which is currently tagged as 1% (3 years), 1.25% (4 years) and 1.5% (5 years). The investment shall be locked-in for one year.

Premature withdrawal, after the lock-in period but before the maturity, shall attract a penal interest of 0.5% if withdrawn within 3 years and 0.25% thereafter.

However, unlike the regular deposits, interest here is calculated in grams and not in rupees. Thus, an investment of 500 grams of gold for three years shall earn 5 grams of gold as interest per annum, compounded annually. At the end of the maturity term, the interest so earned shall be converted into rupee equivalent of gold then and paid to the investor.

For the principal investment, investor will have an option to claim back pure gold (0.999 purity) or cash equivalent of gold as on that day. The scheme is also attractive from tax perspective as the interest earned as well as tax on any capital gains arising from rise in price of gold after maturity is exempt from tax. Gold so deposited has also been exempted from wealth tax.
Source: EconomicTimes