Context:
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
The Union Finance Ministry has announced the discontinuation of the medium- and long-term government deposit (MLTGD) components of the Gold Monetisation Scheme (GMS), effective March 26, 2025. This decision follows a comprehensive review of the scheme’s performance and changing market dynamics.
Medium Term Government Deposit (5-7 years), and. Long-Term Government Deposit (12 – 15 years)
The Gold Monetisation Scheme
The Gold Monetisation Scheme was announced on September 15, 2015, with the objective to reduce country’s reliance on the import of gold in the long run and mobilise gold held by households. Advertisement. Till November 2024, approximately 31,164 kilograms of gold have been mobilised under GMS.
Background of the GMS
- Launched: September 15, 2015
- Objective:
- Reduce dependency on gold imports
- Mobilize household and institutional gold for productive economic use
- Original Components:
- Short-Term Bank Deposits (STBD): 1–3 years
- Medium-Term Government Deposits (MTGD): 5–7 years
- Long-Term Government Deposits (LTGD): 12–15 years
Key Policy Change
- Discontinued Components:
- Medium-term and long-term deposits will no longer be accepted at:
- Designated Collection and Purity Testing Centres (CPTCs)
- Gold Monetisation Scheme Collection & Testing Agents (GMCTAs)
- Bank branches
- Medium-term and long-term deposits will no longer be accepted at:
- Effective Date: March 26, 2025
- Existing Deposits:
- Existing MLTGD deposits will continue until maturity, in line with RBI’s master directions.
What Continues?
- Short-Term Bank Deposits (STBD):
- Will remain available based on individual bank’s commercial viability.
- The Reserve Bank of India (RBI) is expected to release detailed guidelines soon.
Reason for Discontinuation
- Evolving market conditions and scheme performance review.
- Focus on refining the scheme to suit the dynamic financial landscape and enhance gold mobilisation effectiveness.
Implications for Stakeholders
| Stakeholder | Impact |
|---|---|
| Households/Institutions | Limited to short-term deposits, reducing long-horizon monetisation opportunities. |
| Banks | Continued participation through STBDs, subject to profitability. |
| RBI | Will issue revised guidelines on short-term deposit handling. |
The government is shifting its focus to shorter-term gold deposits, possibly due to higher efficiency and bank interest in that segment. The move aligns with market feedback and aims to enhance commercial viability. Continued gold mobilisation will depend on bank adoption and RBI’s revised guidance.
Source: BS
