Gold Monetisation Scheme

Why in News?

The government has decided to discontinue the Gold Monetisation Scheme (GMS) starting from Wednesday (March 26, 2025) in view of the evolving market conditions, the Finance Ministry said.

Introduction

Gold has always been a preferred investment in India, often passed down through generations. However, most of this gold remains idle in homes and bank lockers, earning no returns. The Gold Monetisation Scheme (GMS), introduced by the Government of India in 2015, provides a way to earn interest on gold deposits while ensuring its safety.

If you own gold in the form of jewelry, coins, or bars, this scheme allows you to deposit it in banks and earn tax-free interest while also contributing to the national economy.

What is the Gold Monetisation Scheme?

The Gold Monetisation Scheme (GMS) is a gold deposit scheme where individuals and institutions can deposit their gold with banks for a fixed period and earn interest on it.

The deposited gold is melted, refined, and used for various purposes such as:

• Gold reserves for banks
• Gold-based financial instruments
• Reducing India’s dependence on gold imports

At the end of the tenure, depositors can withdraw their investment in gold or cash, depending on the deposit type.

Background of the Gold Monetisation Scheme

India is one of the largest consumers of gold in the world, with households and institutions holding over 25,000 tonnes of gold. However, most of this gold remains idle in lockers and private holdings, contributing nothing to the economy.

To mobilize this idle gold and reduce reliance on gold imports, the Government of India launched the Gold Monetisation Scheme (GMS) on November 5, 2015.

Why Was the Gold Monetisation Scheme Introduced?

• Reduce Gold Imports:
  • India imports 800-1,000 tonnes of gold annually, which increases the trade deficit. By encouraging citizens to deposit gold, the government aims to reduce gold imports.
• Utilizing Idle Gold:
  • A significant amount of gold remains unused in households and temples. This scheme allows people to earn interest while contributing to the economy.
• Financial Inclusion & Security:
  • Many people store gold at home, which is risky due to theft or damage. The scheme offers a secure alternative with added financial benefits.
• Promote Gold-Based Financial Products:
  • Mobilized gold can be used for loans, reserves, and investment products, strengthening India’s financial system.

Benefits of Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS) is designed to help individuals, institutions, and the economy by converting idle gold into a productive asset. Instead of keeping gold in lockers, depositors can earn interest while ensuring its safety.

Here are the benefits of the Gold Monetisation Scheme:

• Earn Interest on Idle Gold
  • Traditional gold storage generates no returns, but with GMS, depositors earn up to 2.5% interest per annum.
  • Interest is calculated on gold weight, not its market price, ensuring stable earnings.

• 100% Safety and Security
  • Keeping gold at home increases the risk of theft, loss, or damage.
  • Depositing gold in a government-backed bank under GMS ensures complete security.

• Zero Tax Liability
  • The scheme offers tax benefits on:
    • Interest earned (Income Tax-free)
    • Capital Gains (No Capital Gains Tax on appreciation of gold value)
    • Wealth Tax (No wealth tax on deposited gold)

• Flexible Deposit Tenures
  • Choose from three deposit periods based on your financial needs:
    • Short-Term (1-3 years)
    • Medium-Term (5-7 years)
    • Long-Term (12-15 years)
  • Short-term deposits allow withdrawal in gold or cash, while medium and long-term deposits are usually paid in cash.

• No Locker or Storage Costs
  • Many people pay locker charges to store their gold safely in banks.
  • By depositing gold under GMS, you save on locker charges while earning interest.

• Helps Reduce India’s Dependence on Gold Imports
  • India imports 800-1,000 tonnes of gold annually, increasing the trade deficit.
  • Mobilizing domestic gold through GMS reduces import dependence, strengthening India’s foreign exchange reserves.

• Contributes to the Economy
  • Deposited gold is used by banks for loans, reserves, and financial products, benefiting the overall economy.
  • This helps in better financial stability and growth for the country.

• Minimum Deposit Requirement is Low
  • You can deposit as little as 10 grams of gold, making the scheme accessible to small and large investors alike.

• Withdrawal Flexibility
  • Based on your deposit type, you can redeem the gold in physical form or cash.
  • This gives you the option to invest gold for future financial needs without liquidating it permanently.

• Beneficial for Religious Institutions & Trusts
  • Many temples, trusts, and religious institutions hold large amounts of gold.
  • Instead of keeping it idle, they can deposit it under GMS and earn interest.

Why to Invest in the Gold Monetisation Scheme?

Here are the top reasons why the Gold Monetisation Scheme is a better alternative to keeping gold idle at home or in lockers:

• Earn Interest on Gold Deposits
  • Instead of keeping gold in lockers where it generates no returns, you can earn interest up to 2.5% per annum on your deposit.
• Zero Tax Liability
  • Interest earned under the Gold Monetisation Scheme is exempt from income tax, capital gains tax, and wealth tax.
• No Locker Charges
  • Since the deposited gold is stored safely in banks, you don’t have to pay locker maintenance fees.
• Flexible Tenure Options
  • The scheme offers three tenure options:
    • Short-term (1-3 years)
    • Medium-term (5-7 years)
    • Long-term (12-15 years)

• 100% Security
  • Your gold is securely stored in a government-backed scheme, eliminating risks of theft or damage.
• Helps India Reduce Gold Imports
  • By depositing gold in the scheme, you help reduce the need for gold imports, thereby strengthening the Indian economy.

Types of Gold Deposits

The scheme offers three types of deposits:

1. Short-Term Gold Deposit

• Tenure:
  • 1-3 years
• Interest Rate:
  • Varies from bank to bank (approx. 1-2% per annum)
• Withdrawal:
  • Gold or cash
• Bank’s Role:
  • Banks use the gold for lending purposes

2. Medium-Term Gold Deposit

• Tenure:
  • 5-7 years
• Interest Rate:
  • 2.25% per annum (approx.)
• Withdrawal:
  • Mostly in cash (gold option depends on bank policy)
• Bank’s Role:
  • Gold is melted and auctioned for financial use

3. Long-Term Gold Deposit

• Tenure:
  • 12-15 years
• Interest Rate:
  • 2.5% per annum (approx.)
• Withdrawal:
  • Mostly in cash
• Bank’s Role:
  • Gold is melted and used for reserves or financial products

How to Apply for the Gold Monetisation Scheme?

The process is simple and involves a few easy steps:

Step 1: Visit a Collection and Purity Testing Centre (CPTC)

• Find an authorized CPTC near you (available at certain banks and institutions).
• Submit your gold for purity testing and certification.
• Once the gold is assessed, you will get a purity certificate.

Step 2: Open a Gold Deposit Account with a Bank

• Take your purity certificate to a participating bank.
• Open a Gold Savings Account and deposit your gold.
• You will receive a Gold Deposit Certificate, which acts as proof of your investment.

Step 3: Earn Interest on Your Gold Deposit

• Interest starts accumulating from the date of deposit.
• Interest is calculated based on gold weight, not market price.

Step 4: Withdrawal After Maturity

• Upon maturity, you can choose to receive your investment in gold or cash (depending on the deposit type).

Eligibility Criteria for the Gold Monetisation Scheme

• Who can invest?
  • Individuals (Resident Indians, including Hindu Undivided Families – HUFs)
    Trusts & Companies (Religious institutions, charitable trusts, and firms)
• Documents Required:
  • KYC Documents (Aadhaar, PAN, Passport, or Voter ID)
  • Gold Ownership Proof (if applicable)
  • Bank Account Details

Interest Rates Under the Gold Monetisation Scheme

The interest rates vary based on the tenure of the deposit:

Deposit Type	Tenure	Interest Rate (Approx.)
Short-Term	1-3 Years	1-2% per annum
Medium-Term	5-7 Years	2.25% per annum
Long-Term	12-15 Years	2.5% per annum

Interest is calculated on the weight of deposited gold, NOT its market value.

Gold Monetisation Scheme vs Gold ETFs & Gold Bonds

Feature	Gold Monetisation Scheme	Gold ETFs	Sovereign Gold Bonds
Returns	Fixed interest	Market-based	Fixed interest + Market appreciation
Safety	High (Govt-backed)	High	High (Govt-backed)
Physical Gold Required?	Yes	No	No
Liquidity	Moderate	High	Moderate
Tax Benefits	Yes	No	Yes

Conclusion

If you have idle gold at home, the Gold Monetisation Scheme is an excellent way to earn interest while keeping it safe and secure. With tax-free earnings, flexible tenure options, and government backing, it is a smart alternative to traditional gold storage.

• Ideal for individuals and institutions with excess gold
• Better than keeping gold idle in lockers
• Great for long-term gold investors