Gold Monetisation Scheme (GMS)

The Government of India announced the Gold Monetisation Scheme (GMS) in September 2015. Under this scheme, individuals and institutions can deposit their idle gold with banks and earn annual interest on their gold deposits. 

Overview of Gold Monetisation Scheme (GMS)

What is Gold Monetisation Scheme (GMS)?

The Gold Monetisation Scheme (GMS) allows individuals, trusts, and institutions to deposit idle gold (coins, bars) with banks to earn interest while ensuring safety. Deposits offer tax-exempt interest (around 0.5%–2.5% p.a.) and can be redeemed in cash or gold, helping reduce gold imports. Minimum deposit is 10g, with no maximum limit.

The objective of the GMS is:

• To mobilise the gold held by institutions or households.
• Facilitate the use of gold for productive purposes.
• Reduce the country’s reliance on the import of gold in the long run.

Changes In the Gold Monetisation Scheme from March 2025

Due to evolving market conditions, the government has discontinued the Medium-Term Gold Deposit (MTGD) and Long-Term Gold Deposit (LTGD) under the Gold Monetisation Scheme (GMS) from 26 March 2025. The government has also discontinued the renewal of MTGD and LTGD from 26 March 2025. 

The existing MTGD and LTGD are not affected and will continue as per the scheme directions. Customers can continue these until maturity unless they are withdrawn prematurely. 

However, the banks will continue the Short-Term Gold Deposit (STGD) scheme under the GMS. These deposits can be subsequently renewed upon their maturity.

How Does Gold Monetisation Scheme Work?

The GMS works like a savings bank account and saves the fees paid to bank lockers where the gold is kept for safety. Under the GMS, an individual/ institution can deposit gold in a bank savings account and earn interest on it. 

However, Gold jewellery containing stones or other embedded materials is accepted only after purity assessment and removal of non-gold components.

The interest earned under the GMS is paid either in gold or in money equivalent. The GMS provides the option for repayment of the principal either in gold or cash equivalent to the value of gold on the date of deposit/investment maturity. 

However, the repayment of the deposited gold can be in a different form at the time of maturity, such as coin or bullion. The gold may not be given in the same form as deposited. 

Features of Gold Monetisation Scheme

• Minimum Deposit: The minimum deposit under the GMS at any one time is 10 grams of physical gold.
• Maximum Deposit: There is no maximum deposit limit.
• Type of Deposits: There are three types of deposits under this scheme, i.e. short-term, medium-term and long-term.
• Lock-In Period: The lock-in period depends on the type of deposit. For short-term deposit the lock-in period is 1 year, for medium-term it is 3 years and for long-term it is 5 years.
• Type of Gold: Gold is accepted in the form of physical gold, i.e., coins, and gold bars, excluding stones and other metals.
• Nomination: Nomination facility is available under this scheme.

What is the Tenure of Gold Monetisation Scheme?

Historically, the scheme offered short-term, medium-term, and long-term deposits. However, from 26 March 2025, only Short-Term Gold Deposit (STGD) remains available for fresh deposits.

What is the Interest Rate Under the Gold Monetisation Scheme?

The GMS interest rate for the deposit of gold is dependent on the investment scheme, which is as follows:

Note: The interest on the deposits will be calculated in INR on the gold value at the time of deposit.

What is the Eligibility for Gold Monetisation Scheme?

The Reserve Bank of India has stated the eligibility criteria for the gold monetisation scheme. The following are eligible to deposit gold in the GMS: 

• Individuals
• HUFs
• Proprietorship
• Partnership firms
• Companies
• Trusts, including exchange-traded funds and mutual funds registered under SEBI (Mutual Funds) Regulations
• Charitable institutions
• Central government, state governments or any other entity owned by central or state government

The RBI has also stated that two or more eligible owners can make joint deposits under the gold monetisation scheme. In the case of joint depositors, the bank will credit the interest to the joint deposit accounts opened together by the investors.

How to Invest in Gold Monetisation Scheme?

Step 1: Choose a designated bank offering the Gold Monetisation Scheme (GMS). If you are an existing customer of the bank offering the GMS, you can visit any designated branch. If you are not a customer of the designated bank offering the GMS, you must first open a savings or current account with the bank and complete your KYC to opt for the GMS.

Step 2: Once you have an account at the designated bank offering the GMS, fill out the Gold Monetisation Scheme application form at the branch. 

Step 3: Next, visit the nearest Collection and Purity Testing Centre (CPTC) or Collection & Testing Agent (GMCTA) with a customer copy within 7 days of filling out the GMS application.

Step 4: Submit the gold with consent for the melting process to the CPTC and obtain the deposit receipt from the centre with the quantity of gold and purity details. 

Step 5: The CPTC will inform the designated bank about acceptance of deposit, and the designated bank will credit your Short-Term Bank Deposit (STBD) account.

Step 6: You will receive the Gold Deposit Certificate through courier and in your registered e-mail with details of gold quantity, purity, and scheme details.

Issue of Gold Deposit Certificate

The gold deposit certificate will be issued for pure gold contents (i.e., in 995 fineness). The bank credits the customer’s Short-Term Bank Deposit (STBD) account on the same day the deposit receipt is received from the CPTC or within 30 days from the date of gold deposit at the CPTC, whichever is earlier.

Interest on deposits will start accruing from the date the deposited gold is converted into tradable gold bars, or 30 days from the date the gold is received at the CPTC, whichever is earlier.

Which are the Banks Offering Gold Monetisation Scheme?

Below is the list of banks through which you can avail of the Gold Monetisation Scheme:

• State Bank of India (SBI)
• ICICI Bank
• Bank of Baroda
• Indian Overseas Bank
• HDFC Bank
• Punjab National Bank (PNB)
• Union Bank of India 
• Yes Bank

Repayment Under Gold Monetisation Scheme

The repayment provisions under the Gold Monetisation Scheme are as follows:

• Principal Repayment on Maturity: The principal will be repaid in gold or INR equivalent of the value of deposited gold at the time of redemption.
• Interest Repayment on Maturity: The interest will be repaid in INR, based on the value of gold in Indian Rupees at the time of deposit.

For example: Suppose the principal amount is 300.78 grams of gold, and the customer has to be paid in gold, the bank can repay 300 grams in gold and 0.78 grams in an equivalent amount of INR along with the interest amount in INR. 

Premature Redemption Under Gold Monetisation Scheme

Any premature redemption of the MTGD and LTGD will only be in INR, while in the case of STGD, it will be as determined by banks. Premature redemption on STGD can be in INR or gold at the bank’s discretion. 

The applicable interest rate upon premature redemption of MTGD and LTGD are as follows: 

Premature Closure of GMS

The premature closure conditions and process will be determined the designated bank in the case of STGD. In the case of MTGD or LTGD deposits, premature closure before the lock-in period is available in the case of death of the depositor or default of loan taken against the deposit certificate.

Benefits of Investing Gold Monetisation Scheme

• Gold Storage with Returns: The GMS provides an option to store idle gold at banks for a short, medium, and long tenure reducing the need for locker storage of idle gold while obtaining interest on it. Thus, the GMS gives an option to gain returns on gold that would otherwise lie still in lockers.
• Encashment of gold: Eligible persons or institutions can encash the value of gold when it appreciates by investing in GMS. Gold can be utilised in the best possible way through GMS. Investing gold under GMS increases its safety and lets the individual or institution profit from it.
• Flexibility: There is no need to invest gold in a specific form in the GMS. An individual or institution can invest in gold coins, bars. There is also no maximum limit on the amount of gold that can be invested under the GMS.
• Tax benefits: Eligible GMS deposits currently receive exemptions from capital gains tax and income tax on interest, subject to prevailing tax laws.

The Gold Monetisation Scheme (GMS) provides an opportunity for individuals or institutions to earn money from their idle physical gold. This scheme provides a principal and interest amount for the deposited gold and lets depositors benefit from the appreciation of gold prices. Additionally, the interest and principal amount have tax benefits, thus, helping depositors increase their wealth. 

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