GMS 2.0

Reasons

• The scheme has been able to collect less than 20 tonnes while two years back, the World Gold Council had estimated that Indian households held as much as 24,000 tonnes of gold.
  
  
• Banks have the main culprit behind this failure. 14 banks have indeed signed tripartite agreements with seven refineries and 47 hallmarking centres to run the scheme.
  
  
• However, they have not returned signed agreements with the respective centres to start the process. In other words, they have not launched the scheme.
  
  
• The present scheme failed to attract gold lying in temples as these temples are managed by trusts that have deeds that do not allow selling of gold.
  
  
• And the GMS, in its present format, gives back cash over the medium or long term – this tantamounts to selling gold, which is prohibited by the trust deeds.
  
  
• Also, in present scheme, no attention was given to the lack of availability of bills. Many potential depositors do not want to go through the hassle of depositing gold, as they don’t have supporting bills.
  
  

Features of GMS

• Launched in 2015, it has these key features:
  
  
• There are three kinds of deposits — short, medium and long term. Under the short-term (one to three years) scheme.
  
  
• Banks are allowed to lend to jewellers, collect it back and return to depositors on maturity.
  
  
• Under the medium- and long-term schemes (five to 15 years), the liability of the deposit is with the government.
  
  
• The mobilised gold is to be auctioned by the MMTC on behalf of the government, and the money collected will be treated as market borrowings.
  
  

What Is Being Proposed?

• The government is planning to ask banks to open a gold metal deposit account, which will allow banks to return gold in the metal form on maturity instead of the equivalent value in cash.
  
  
• This move could be particularly attractive to temples, which hold around 3,500 to 4,000 tonnes, as they would like to get back gold in metal format instead of cash.