What is Gold Savings Account? After Jan Dhan, India Posts Payments Bank (IPPB), Modi govt mulls this gift

What is Gold Savings Account? PM Narendra Modi-led Union government is said to be considering to implement Niti Aayog-suggested first of its kind Gold Savings Account Scheme for all citizens of India, especially for those living in the rural areas and do not have access to other saving instruments. The proposal for the launch of GSA was made to the government by the NITI Aayog. In a report titled, 'Transforming India's Gold market', NITI Aayog explains that the purpose of GSA is to "provide the citizens with the opportunity to save in gold without hassles and no losses at the time of encashment."

People often use gold as a saving instrument that they can encash as and when required. However, at the time of encashment or exchange, people have to foresake the cost of labour charges, taxes etc.  Justifying the need of the scheme for people living in rural areas, the report says, "while the people living in urban areas may have the option of other financial tools to choose from, the citizens living in the rural areas often shy away from complex financial products and therefore choose to invest in gold. It is essential to recognise that the citizens living in the rural areas that choose to invest their savings in gold do so as it permits them an opportunity to encash the gold/jewellery immediately if the need be. It is for these very people that the new revamped Gold Savings Account (GSA) is proposed."

The GSA "would provide the citizens with the opportunity to save in gold with no losses due to labour charges and taxes at the time of encashment."

While the government is yet to take a final decision regarding the launch of GSA, the upcoming festival season and elections make strong the chance of an announcement about the scheme rollout by the Centre. Moreover, as the report says, "The launch of the revamped GSA is eased due to the huge success of the Pradhan Mantri Jan Dhan Yojna (PMJDY)."

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GSA features

- The report says that " GSA will have every quality of holding physical gold except that it is in paper form but can be converted into physical gold at a short notice as and when desired by the account holder." 

- GSA will help investors and individuals to deposit rupees to accumulate their savings in Gold. 

- GSA will offer an opportunity to build up an investment in gold over a period of time by virtually saving in gold terms rather than INR terms. 

Similar to general Savings Account?

The report says, " In essence, the GSA is similar to any other savings interest-bearing deposit account held at a bank or another financial institution that provides an interest rate except that the deposit made in rupees will be translated in physical gold held by the bank or the financial institution. When a customer deposits cash in his or her account, the bank will credit grams of gold. The price of gold will be based on the date on which the deposit is made."

A depositor can operate the GSA as any other savings account. They can buy gold at the displayed price, and get the account credited with the equivalent of physical gold in grammage. 

Interestingly, the GSA could also be "linked to a demat account which would enable the linkage of digital gold accounts across banks through the proposed Bullion exchange and its vaulting infrastructure."

How GSA will work

GSA account holders will provide a sum of money to be invested in gold when required. The will have the option of redeeming the gold in rupees or in gold weight terms. 

-  GSA account holder would purchase gold at the prevailing market rate. 

- The minimum investment size for purchase would be 1 gram and multiples thereof. 

- Every new investment (buy) would reflect as credit into the account and every withdrawal (sell) is a debit. 

- Like the savings account, banks can issue a simple passbook to the investor showing the quantum of gold to his or her credit. 

GSA interest rate

The report suggests that banks shall "pay interest on the gold purchased by the borrower at the same rate as paid to the deposits accepted under the Gold Monetisation Scheme (GMS), which shall be in sync with international gold lease rates."

GSA tenure

The shall be no minimum limit or maximum time limit

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GSA transfer

Customers will be able to transfer the gold accumulated in the GSA to any other person or entity, through a letter to the bank, if the recipient also has a GSA.

GSA redemption

The report reccomends, "In case redemption in physical gold not possible, GSA account holder may be given equivalent amount in rupee terms but in due course, banks may develop capability of being able to provide physical gold if demanded."