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Gold Monetisation Scheme – A haven for gold lying idle

March 28, 2022 / 07:16 PM IST

Are you among those who have a good quantity of physical gold lying idle in the bank lockers for years, but continue to pay the locker fee annually? Well, you can put that idle gold to some good use without selling it off. The Government of India in November 2015 introduced the Gold Monetisation Schemes to safeguard the gold held in Indian households as well as to help the owners earn interest on their unused gold.

The GMS is basically a new deposit tool with an objective to cut down the country’s gold imports by decreasing domestic demand. Apparently, India is one of the largest consumers of gold, second only to China. It is no longer a hidden fact that India's religious sites hold tons of gold reserves.  This scheme is a modification of the existing Gold Deposit Scheme (GDS) and Gold Metal Loan Scheme (GML) which would eventually replace the existing Gold Deposit Scheme, 1999.

Here’s all you need to know about the Gold Monetisation Scheme 2015 (GMS):

How does it work?

Under the Gold Monetisation Scheme, the jewellery, ornaments, bullion, coins are deposited with designated banks to test their purity. Once the purity of the gold is verified, the metal is melted and converted into bullion or gold coins and the depositors are paid annual interest on the invested gold. So let’s say if you deposit your gold bangles or necklaces with the bank under GMS, then on maturity, the bank will not return the deposited gold in the same shape and form. However, you can earn interest on the gold you have deposited with the bank depending upon the tenure (As explained below). Earlier, the process to issue a purity certificate took up to 30 days, however, the process has now sped up as the government permitted 46 centres to function as Collection and Purity Testing Centres. The best part about this scheme is that it allows you to deposit a minimum of 30 gm of physical gold.

Tenure and interest rates

For the convenience of all kinds of investors, the scheme is divided into 3 deposit plans – short-term, middle-term and long-term. The duration of these plans is 1 to 3 years, 5 to 7 years and 12 to 15 years respectively. An investor can also withdraw the deposit before the expiry of the term after paying a small penalty. However, there is a lock-in period of 1 year in the case of the short-term plan, 3 years in the mid-term plan and 5 years in the long-term plan. The interest rate offered for the short-term plan is 0.5% p.a. for 1 year, 0.55% for 2 years, 0.60% for 3 years. For mid-term it is 2.25% p.a and for long-term, it is 2.5% p.a.


If you opt for the short term deposits, you can choose to redeem in either physical gold or in cash at current rates applicable at the time of redemption. However, Medium-term and long-term deposits can only be redeemed in cash. If you choose to have your returns as physical gold, you get it as gold coins or bars in 995 purity.


To encourage households and other entities to deposit idle gold in the GMS scheme, the government also offers tax benefits to the customers. In case anyone chooses to withdraw his/her deposit as money, no capital gain tax will be levied on the same. Moreover, capital gains are also exempt from wealth tax and income tax.

How is it different from the previous GMS?

The first gold monetisation scheme was introduced in 1962 by the then Finance Minister Morarji Desai. The GMS 2015 is the sixth such scheme introduced by the government of India. However, with some modifications and newer benefits, the current scheme holds an edge over the previous ones.

Ever since its implementation, the new Gold Monetisation Scheme has accumulated deposits with over 23.3 tonnes of gold collected so far. Unlike the old schemes where the minimum gold deposit was 500 grams, this one offers a minimum deposit of 30 grams so that even small investors/ households can also opt for it. The flexibility of choosing between a range of tenures is also one of its new features. Furthermore, as the government has permitted 46 centres to function as Collection and Purity Testing centres with each one designed to accept deposits, it has made the whole process much simpler and shorter.

Moneycontrol journalists were not involved in the creation of the article.

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first published: Mar 28, 2022 07:13 pm
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