The Reserve Bank of India (RBI) on 21 January widened the gold monetisation scheme by amending some of the guidelines, making it more customer-friendly. RBI has allowed whole or part premature withdrawal of the deposits, subject to minimum lock-in period and penalties. Even though with a penalty, depositors will now be able to withdraw medium-term (5-7 years) and long-term (12-15 years) government deposits pre-maturely after the minimum lock-in period.

The penalty will be the sum of actual market value of the gold deposit on the day of withdrawal and interest payable on the value of the gold at the time of deposit. For medium-term deposits, withdrawal between three years and five years will attract a penalty of 0.375 per cent in a reduced interest rate. For withdrawal between five to seven years, the penalty will be 0.25 per cent in a reduced interest rate. For long-term deposits, the penalty between five to seven years will be 0.25 per cent; between seven to 12 years, 0.375 per cent; between 12 to 15 years, 0.25 per cent.

Under the gold monetisation scheme, resident Indians, individuals or trusts including mutual funds, exchange-traded funds (ETFs) registered with capital market regulator Sebi, and temples, among others can deposit gold, bullion, and jewellery in banks and earn interest on such deposits. The mobilised gold will supplement RBI’s gold reserves and help in reducing the government’s borrowing costs. In the long run, the mobilised funds will also reduce India’s reliance on gold imports.

RBI has also said that for an initial period of one year from the date of launch of the scheme, i.e. November 5, 2015, government will pay the participating banks a total commission of 2.5 per cent (1.5 per cent handling charges and 1 per cent commission).