Executive Summary:
This document contains amendments to the Reserve Bank of India (RBI) Gold Monetization Scheme, 2015, effective immediately. It modifies the terms for short-term deposits and Medium and Long Term Government Deposits (MLTGD), including interest calculation, premature withdrawal conditions, redemption options, and handling charges for designated banks. The changes update the RBI Master Direction No.DBR.IBD.No.4523.67.003/2015-16 dated October 22, 2015.
Key Points / Main Content:
Short Term Deposits:
* Deposits are treated as banks' on-balance sheet liability.
* The deposit period ranges from 1-3 years, with rollover options and flexibility for broken periods (e.g., 1 year 3 months).
* Interest for broken periods is calculated as the sum of interest for the completed year plus interest for the remaining days, using the formula: D/360 * ARI.
Medium and Long Term Government Deposits (MLTGD):
* Maturity: MTGD for 5-7 years; LTGD for 12-15 years, with options for broken periods.
* Interest Rates: Determined by the Central Government and notified by RBI. Current rates: 2.25% p.a. for MTGD, 2.50% p.a. for LTGD. Interest for broken periods is calculated as the sum of interest for the completed year plus interest for the remaining days, using the formula: D/360 * ARI.
* Interest Payment: Annual, paid on March 31st. Depositors can choose between simple annual interest or cumulative interest at maturity.
* Minimum Lock-in: MTGD can be withdrawn after 3 years; LTGD after 5 years.
* Premature Withdrawal: Payable amount is the sum of the actual market value of gold on the day of withdrawal and interest on the gold value at the time of deposit based on specified rates depending on the deposit and lock-in period.
* Redemption: At maturity, depositors can choose redemption in Indian Rupees or gold. Premature redemption is only in INR. Gold redemption incurs an administrative charge of 0.2% of the notional redemption amount in INR. Interest is calculated based on the value of gold in INR at the time of deposit and paid in cash.
Handling Charges and Commission:
* Designated banks receive a flat rate of 1.5% for handling charges (including testing, refining, etc.) and a 1% commission on the rupee equivalent of mobilized gold, effective from November 5, 2016, until further notice.
Impact Analysis:
Scheduled Commercial Banks (excluding RRBs):
* Impact: Changes in deposit terms, interest calculation, and handling charges affect their operational procedures for the Gold Monetization Scheme.
* Action Required: Update internal systems and procedures to comply with the revised guidelines for short-term deposits and MLTGD, including interest calculations, premature withdrawal terms, and handling charges.
Depositors:
* Impact: Altered terms for deposits, premature withdrawals, and redemption options influence their decisions regarding participation in the Gold Monetization Scheme.
* Action Required: Review the updated terms, particularly concerning interest rates, lock-in periods, premature withdrawal penalties, and redemption options (INR vs. gold), to make informed decisions about their deposits.
Central Government:
* Impact: The Central Government decides on the interest rates applicable to MLTGD.
* Action Required: Continue to set and notify the interest rates for MLTGD, taking into account market conditions and policy objectives.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector.
Banking Regulation Act, 1949: An act of the Indian Parliament that empowers the Reserve Bank of India to regulate, control, and inspect banks in India.
Gold Monetization Scheme, 2015: A scheme by the Government of India to mobilize gold held by households and institutions in the country and to facilitate its use for productive purposes.
All Scheduled Commercial Banks: All commercial banks in India that are listed in the Second Schedule of the Reserve Bank of India Act, 1934 (excluding RRBs)
Medium Term Government Deposit (MTGD): A type of deposit under the Gold Monetization Scheme, with a maturity period of 5-7 years.
Long Term Government Deposit (LTGD): A type of deposit under the Gold Monetization Scheme, with a maturity period of 12-15 years.
Central Government: The executive branch of the Government of India.
Mumbai, Maharashtra: The location of the Central Office of the Reserve Bank of India.
RESERVE BANK OF INDIA
Department of Banking Regulation
Central Office
Mumbai-400 001
RBI/2017-18/192
DBR.IBD.BC.109/23.67.001/2017-18 June 7, 2018
All Scheduled Commercial Banks (excluding RRBs)
Dear Sir/Madam
Gold Monetization Scheme, 2015
In exercise of the powers conferred on the Reserve Bank of India under Section 35A
of the Banking Regulation Act, 1949, the RBI makes the following amendments in
the Reserve Bank of India (Gold Monetization Scheme, 2015) Master Direction
No.DBR.IBD.No.45/23.67.003/2015-16 dated October 22, 2015, with immediate
effect.
1. The existing sub-paragraph 2.2.1 (ii) shall be amended to read as follows:
“The short term deposits shall be treated as bank’s on-balance sheet liability.
These deposits will be made with the designated banks for a short period of 1-3
years (with a facility of roll over). Deposits can also be allowed for broken periods
(e.g. 1 year 3 months; 2 years 4 months 5 days; etc.). The rate of interest
payable in the case of deposits for maturities with broken periods shall be
calculated as the sum of interest for the completed year plus interest for the
number of remaining days at the rate of D/360*ARI”
Where, ARI= Annual Rate of Interest
D= Number of days
2. The existing sub-paragraph 2.2.2 (iv) shall be amended to read as follows:
“(iv) Other features of the Medium and Long Term Government Deposit (MLTGD)
shall be as under:
(a) Maturity
1The Medium Term Government Deposit (MTGD) can be made for 5-7 years and
Long Term Government Deposit (LTGD) for 12-15 years or for such period as
may be decided by the Central Government from time to time. Deposits can also
be allowed for broken periods (e.g. 5 years 7 months; 13 years 4 months 15
days; etc.).
(b) Rate of interest:
• The rate of interest on such deposits will be decided by Central
Government and will be notified by Reserve Bank of India from time to time.
The current rate of interest as notified by the Central Government are as
under:
(i) On medium term deposit – 2.25% p.a.
(ii) On long term deposit – 2.50% p.a.
• The rate of interest payable in the case of deposits for maturities with
broken periods shall be calculated as the sum of interest for the complete
year plus interest for the number of remaining days at the rate of D/360*ARI
Where, ARI= Annual Rate of Interest
D= Number of days
(c) The periodicity of interest payment
The periodicity of interest payment on these deposits is annual and shall be
paid on 31st March every year. A depositor will have an option to receive
payment of simple interest annually or cumulative interest at the time of
maturity, in which case it will be compounded annually. This option shall be
exercised at the time of deposit.
(d) Minimum lock-in period
A Medium Term Government Deposit (MTGD) is allowed to be withdrawn
any time after 3 years and a Long Term Government Deposit (LTGD) after 5
years.
(e) Interest on premature withdrawal
The amount payable to the depositor on premature withdrawal after lock-in
period shall be calculated as a sum of (A) and (B), as indicated below:
(A) Actual market value of the gold deposit on the day of withdrawal.
2(B) Interest payable on the value of the gold at the time of deposit as under.”
Type of Lock-in Actual period for which the deposit has run (years)
deposit period
(years)
>3 and < 5 ≥5 and < 7
MTGD 3 Applicable rate for MTGD at Applicable rate for MTGD at
the time of deposit - 0.375% the time of deposit - 0.25%
Type of Lock-in Actual period for which the deposit has run (years)
deposit period
(years)
>5 and < 7 ≥ 7 and < 12 ≥12 and < 15
LTGD 5 Applicable rate Applicable rate Applicable rate for
for MTGD at the for LTGD at the LTGD at the time
time of deposit - time of deposit - of deposit - 0.25%
0.25% 0.375%
3. The existing sub-paragraph 2.2.2 (v) shall be amended as under:
“In the case of MLTGD, the redemption of principal at maturity shall, at the
option of the depositor, be either in Indian Rupee equivalent of the value of
deposited gold at the time of redemption, or in gold. However, any pre-mature
redemption of MLTGD shall be only in INR. Where the redemption of the
deposit is in gold, an administrative charge at a rate of 0.2% of the notional
redemption amount in terms of INR shall be collected from the depositor.
However, the interest accrued on MLTGD shall be calculated with reference
to the value of gold in terms of Indian Rupees at the time of deposit and will
be paid only in cash.”
4. The existing sub-paragraph 2.2.2 (ix) shall be amended as under:
“Central Government has decided that with effect from November 5, 2016,
designated banks will be paid handling charges (including gold purity testing,
refining, transportation, storage and any other relevant costs) for MLTGD at a
flat rate of 1.5% and commission at the rate of 1% of the rupee equivalent of the
amount of gold mobilized under the scheme until further notice.”
35. The Reserve Bank of India Master Direction No.DBR.IBD.No.45/23.67.003/ 2015-
16 dated October 22, 2015 on Gold Monetization Scheme, 2015 has been updated
incorporating the above changes.
Yours faithfully
(Prakash Baliarsingh)
Chief General Manager
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