Saturday, 10 September, 2011

Illinois is Broke, with a capital B - Is USA next?

Illinois is Broke, with a capital B - Is USA next?

The state of Illinois, USA is broke. Bankrupt. Kaput. It has stopped paying bills. Not yesterday. Not last week. Not last month. At least from May 2010.

Take a look at this link:

If you thought that the above is a stray example picked up from the past, think again. The situation has not improved. On the contrary, it has obviously worsened. Take a look:

Why am I bringing your attention to the above articles in a blog on personal finance with a focus on Indian readers?

Two quick reasons:

  1. When the US catches a cold, the world sneezes. When the US sneezes, the world develops pneumonia.
  2. When people or governments (howsoever rich or resourceful,) fail to follow principles of fiscal prudence, the end result is financial ruin.

We've been hearing about problems of countries like Greece, Iceland, Italy, etc.

Occasionally, we've been hearing about the US at a macro level. The extent of financial troubles at the state level within the US is relatively unknown to the majority of us.

However, the problems of the states is not merely their own problems. It will certainly, over a period of time, result in:

  • Either higher taxes or lower welfare benefits or hyper-inflation, or a combination thereof
  • People, Industries WILL move out of high cost, high-tax, low-infrastructure states to low-cost, low-tax, high-infrastructure states.
  • Ditto for countries. If the US as a whole does not pull up its socks, it will become increasingly uncompetitive in the world markets and it will proceed towards bankruptcy as a nation. That would be a disaster with unimaginable and unforeseen consequences to the rest of the world

If that's the situation for the nation which has the luxury to print the reserve currency of the world, imagine the plight of a country like India.

Our fiscal deficit is a pathetic reflection of the overall financial mess that we are in. This is despite the fact that we haven't had much of government spending on developing infrastructure in recent years. Reasons are many. I hope to cover it in future posts.

Remember the basic principles of fiscal prudence. Take care.

We're living in dangerous times.



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Thursday, 8 September, 2011

Gold Deposit Scheme from SBI

Gold Deposit Scheme from SBI

Apparently, SBI (State Bank of India) has introduced a "Gold Deposit Scheme" some time back. Wonder why enough publicity has not been given for the same.

Take a look at this mail that I got from one of the Yahoo Groups. This could be of significant interest to

  • HNIs for diversification across asset classes
  • Those who are interested in generating returns on gold over and above the normal appreciation in gold prices
  • Upper middle class individuals from traditional families with very young daughters / grand daughters (who want to accumulate gold, but are wary about buying jewels as fashions do change over a period of a couple of decades)

Do take a look at this:

BI GOLD DEPOSIT SCHEME (GDS) an ideal deposit plan for HNIs/Trusts etc. 


SBI Gold Deposit Scheme (GDS) is in the nature of a fixed deposit in gold. The customers can deposit their idle gold under GDS which will provide them safety, interest earnings, tax benefits and a lot more. Under this scheme, you can deposit minimum 500 gram of gold with SBI and maximum as much as you want. Many Temples and trusts in India deposit literally hundreds of KGs of gold every year with SBI. Once you deposit your gold with SBI, The gold deposited is melted, assayed (tested) and minted (coined) at the India Government Mint (IGM) before the Gold Deposit Certificate is sent to the depositor within 90 days from the day the gold is deposited (The expenses incurred in
this connection will be borne by the bank). It will indicate the weight of pure gold in the gold deposited, in 999 fineness. However, a provisional receipt is issued by the bank immediately upon receiving the deposit. With the help of the certificate, the depositor can claim the gold upon maturity of the deposit (alternatively, the depositor can claim back the INR equivalent of gold deposited at prices ruling on the day).


You will not get your jewellery back in the same form what you deposited. SBI melts the deposited gold and check the purity and then converts it into gold bars. Depending on the purity of the gold you deposited SBI send you  a gold deposit certificate within 90 days. The Bank bears all expenses associated with this process. The gold is returned in bar/bullion or equivalent cash. If you deposit in bar or bullion, the Scheme is more beneficial.

However, unlike the regular deposits, interest here is calculated in grams and not in rupees. Thus, an investment of 500 grams of gold for three years shall earn 5 grams of gold as interest per annum, compounded annually. At the end of the maturity term, the interest so earned shall be converted into rupee equivalent of gold then and paid to the investor like other bank fixed deposit

For the principal investment, investor will have an option to claim back pure gold (0.999 purity) or cash equivalent of gold as on that day. The scheme is also attractive from tax perspective as the interest earned as well as tax on any capital gains arising from rise in price of gold after maturity
is exempt from tax. Gold so deposited has also been exempted from wealth tax.

Main features of GDS are as follows  




To mobilize the idle gold in the country and put it into productive use.           

To provide the customers an opportunity to earn interest income on their idle gold holdings.                  


Any Resident Indian of the following categories:

(i)  Individuals, singly or jointly (as Former or Survivor)

(ii)  HUFs
(iii)  Trusts
(iv)  Companies

Minimum Quantity

500 gms (gross)
(No upper limit for deposit)

Period of deposit

3 yrs,4 yrs or 5 yrs

Rate of Interest & Payment


The current interest rates w. e f. 01.09.2010 are: 0.75% p.a. for 3 years, 1.00% for 4 years and 1.00% for 5 years.           

Interest is calculated in Gold currency (XAU) and paid in equivalent rupees.                  

Interest rate is subject to change.                  

Option for Interest Payment: Non-Cumulative (on 31st March) every year or Cumulative (On Maturity)                  

Acceptance of gold

Gold i.e. Gold bars, Coins, Jewellery etc. will be accepted in scrap form only.           

Customers to submit Application Form, Identification Proof, Address Proof and Inventory Form.                  

Provisional Receipt issued at the time of acceptance of gold.                  

Issue of Gold Deposit Certificate

Gold Deposit Certificate will be issued by Nodal Branch (i.e. Bullion Branch, Mumbai) after the gold is melted, assayed and minted at India Govt. Mint (IGM).           

The certificate will be issued for pure gold contents (i.e. in 999 fineness).                  

Multiple certificates (max 5) can be issued.                  

Gold Deposit Certificate (GDC) will be sent to the depositor within 90 days from the deposit of gold.                  


Effective Date

Date of assay certificate of IGM or 30 days of receipt of gold whichever is earlier.


Nomination facility

Available for deposits in single names in individual capacity.



Transferable by endorsement and delivery.
Transfer to be noted with Nodal Branch.


Option to take repayment of principal either in gold or equivalent rupees as on the date of maturity.


Premature payment

Premature payment permitted after a lock-in period of 1 year with a penalty on applicable interest rate



Can be renewed any time after maturity provided the renewal is for a future period for the term and interest rate as available on the date of maturity


Loan facility

Rupee loans available at any branch of SBI up to 75% of the notional value of gold.


Tax benefits

Exemptions from Income Tax, Wealth Tax and Capital Gains Tax available.



Designated  SBI Branches for acceptance of gold:


Agra Main

Chennai, T. Nagar

Kanpur Main


Ahmedabad Main


Kolkata Main




Lucknow Main


Bangalore Main

Dehradun Main



Baroda Main

Darbargadh (Bhavnagar)


Shivaji Park, Mumbai





Bhopal Main


Meerut Cantt


Bhubaneswar Main




Bullion Branch, Mumbai


Mumbai Main



Hyderabad Main

Nagpur Main



Indore Main



Chandigarh Main

Jaipur Special

Patna Main


Chandni Chowk Delhi

Jallandhar Main

PBB, New Delhi 



Pune Main



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