RBI amends Gold Monetization Scheme, 2015; Guidelines issued for Renewal/ Redemption of Medium and Long-Term Government Deposit

On 04-08-2022, the Reserve of India (‘RBI') amended the RBI (Gold Monetization Scheme, 2015) with immediate effect.

The amendment inserts following guidelines on Renewal/ Redemption of Medium and Long-Term Government Deposit Guidelines for Renewal/ Redemption of Medium and Long-Term Government Deposit (‘MLTGD'):

1. The redemption of principal at the time of maturity should either be in Indian Rupee (‘INR') equivalent of the value of deposited gold at the time of redemption or in gold. The option for both is open to the depositor.

2. If any premature redemption is made it should only be in INR. The bank has the option to collect the maturing proceeds in gold or in INR equivalent to the deposit at the time of initial deposit.

3. When any account is opened, the nominee details and their share in maturity proceeds should be ascertained by the bank. In case the account already exists, the bank should ensure the details as mentioned earlier and then submit a compliance report to the Reserve Bank of India (‘RBI') within 6 months from the date of issue of these directions.

4. The interest accrued should be calculated with reference to INR equivalent of value of gold at the time of deposit and should be paid only in INR.

5. The depositors should be informed by the banks through letter or electronic means, 120 days prior to redemption or renewal, a list of banks (state-wise branches), having the facility of redemption in gold, also specifying the additional administrative charges.

6. At the time of redemption/renewal/ premature closure of MLTGD, the depositor should provide the original deposit certificate.

7. At the time of redemption, if the original savings/ current account is not operational then an alternate account detail should be provided to the bank.

8. A deposit maturing on a non- working day should be redeemed on the next working day without any interest.

9. No interest will be paid on the outstanding deposit, in case the deposit is not redeemed on the due date / deposit certificate is not furnished on the due date.

10. The renewal of deposits with retrospective effect shall not be allowed.

11. The excess interest paid in case of premature closure can either be adjusted from the principal amount at the time of repayment or should be recovered separately from the customer by crediting the full principal amount at the time of redemption.

Redemption in Gold

1. The quantity of gold should be payable in multiples of 10 grams and the remaining fraction of gold should be paid in INR.

2. The administrative charge should be 0.5% of the notional redemption amount as on the maturity date.

3. If in response to its 120 days prior communication, the depositor does not indicate any choice for mode of redemption then the option indicated at the time of account opening will prevail.

4. If the gold is not redeemed by the customer on the maturity date, then the bank will keep it in its custody for a maximum period of 60 days which can be renewed by the depositor within these 60 days, after paying the administrative charges.

5. If the deposit is not redeemed/ renewed on the due date or within 60 days from the date of maturity then the redemption will automatically be made in INR and the money should be credited to the linked savings/ current account of the depositor and in case of non-availability of an active bank account, the bank should report the same to RBI.

6. Arrangement of gold by the designated banks:

   • The bank should maintain the stock at least equivalent to the gold redemption due in the next 3 months.

   • Surplus MLTGD gold with 1 bank can be transferred to another to meet MLTGD redemption.

   • Banks can also purchase India Good Delivery Standard gold/ London Bullion Market Association's (‘LBMA's') Good Delivery Standard (‘LGDS') gold bars from the local refineries empaneled with the banks or Minerals and Metals Trading Corporation (‘MMTC') that can reimbursed from the Government.

   • In case sufficient gold is not available with any bank for redemption, RBI has to inform the Government, at least 3 months prior to the date of redemption.

Redemption in INR- Modalities

The depositor should furnish the original deposit certificate with his account details in any Gold Monetization Scheme branch of the bank and his account will be credited accordingly.

Renewal of Deposit- Modalities

1. A depositor will be allowed for renewal, irrespective of the option exercised at the time of original gold deposit.

2. The depositor will have to show his willingness in response to the bank's communication.

3. Deposit will be accepted at the prevailing rate on the date of receipt of request for renewal.

Partial Renewal and Partial Redemption in gold/INR- Modalities

1. Part renewal is allowed as per the process and terms mentioned above.

2. Redemption of the remaining gold deposit is permitted as per the process and terms mentioned above.